<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM T-3
FOR APPLICATION FOR QUALIFICATION OF INDENTURES UNDER THE TRUST INDENTURE
ACT OF 1939
--------------
CAPITAL GAMING INTERNATIONAL, INC.
(Name of Applicant)
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, New Jersey 08232
(Address of Principal Executive Offices)
---------------
SECURITIES TO BE ISSUED UNDER THE INDENTURE TO BE QUALIFIED
-----------------------------------------------------------
TITLE OF CLASS AMOUNT
12% Senior Secured Notes due 2001 $23,100,000 Aggregate Principal Amount
Approximate date of proposed public offering: On or soon as practicable
after the Effective Date (as defined in the Plan referred to hereinafter).
Name and address of agent for service:
William S. Papazian
Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, New Jersey 08232
copy to:
Barry N. Seidel, Esq.
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
<PAGE>
GENERAL
1. General Information. Furnish the following as to the applicant:
(a) Form of organization: A corporation
(b) State or other sovereign power under the laws of which
organized: New Jersey
2. Securities Act exemption applicable. State briefly the facts relied upon
by the applicant as a basis for the claim that registration of the indenture
securities under the Securities Act of 1933 is not required.
On December 23, 1996, Capital Gaming International, Inc. (the
"Debtor"), filed its Plan of Reorganization, dated December 22, 1996,
with the United States Bankruptcy Court for the District of New Jersey
(the "Bankruptcy Court"). On February 6, 1997, the Debtor filed its
First Amended Plan of Reorganization (the "Plan"). At a hearing before
the Bankruptcy Court on February 6, 1997, the Bankruptcy Court,
pursuant to section 1125 of title 11 of the United States Code (the
"Bankruptcy Code"), approved the Disclosure Statement for the Plan (the
"Disclosure Statement") as containing adequate information. By order of
the Bankruptcy Court dated March 31, 1997, the Plan, as further
modified, was confirmed, as of March 19, 1997. A copy of the Disclosure
Statement is attached as Exhibit T3E.1 to this Form T-3. The Plan is
hereby incorporated by reference to exhibit 2.1 of the Applicant's Form
8-K filed with the Securities and Exchange Commission on April 3, 1997.
The 12% Senior Secured Notes due 2001 (the "Securities") of the
Company, the securities to be issued under the indenture to be
qualified (the "Indenture"), are offered and intended to be exchanged,
pursuant to the Plan, for claims against the Debtors classified in
Class 2, Class 4, and certain key officers of the Debtor under the
Plan. Under the terms of the Plan, the Securities will be distributed
if certain conditions precedent are satisfied or waived as set forth in
the Plan.
Section 1145 of the Bankruptcy Code exempts the offer or sale of
securities under a plan of reorganization from registration under the
Securities Act of 1933 and state law. Under section 1145, the issuance
of securities is exempt from registration if three principal
requirements are
<PAGE>
satisfied: (1) the securities are issued by a debtor, its successor, or
an affiliate participating in a joint plan with the debtor, under a
plan of reorganization; (2) the recipients of the securities hold a
claim against the debtor or such affiliate, an interest in the debtor
or such affiliate, or a claim for an administrative expense against the
debtor or such affiliate; and (3) the securities are issued entirely in
exchange for the recipient's claim against or interest in the debtor or
such affiliate, or "principally" in such exchange and "partly" for cash
or property. The Debtors believe that the issuance of the Securities to
holders of Allowed Noteholder Secured Claims in Class 2 under the Plan
will satisfy all three conditions because: (a) the issuances are
expressly contemplated under the Plan; (b) the recipients are holders
of "Claims" against in the Debtors; and (c) the recipients would obtain
the Securities in exchange for their prepetition claims.
AFFILIATIONS
3. Affiliates. Furnish a list or diagram of all affiliates of the applicant
and indicate the respective percentages of voting securities or other bases of
control.
<TABLE>
<CAPTION>
Affiliate State of Incorporation Percentage of Voting Securities
<S> <C> <C>
Capital Development Gaming Corp. Rhode Island 100% owned by the Company
Capital Gaming Management, Inc. New Jersey 100% owned by the Company
As of Effective Date
Affiliate State of Incorporation Percentage of Voting Securities
<S> <C> <C>
Capital Development Gaming Corp. Rhode Island 100% owned by the Company
Capital Gaming Management, Inc. New Jersey 100% owned by the Company
</TABLE>
<PAGE>
MANAGEMENT AND CONTROL
4. Directors and executive officers. List the names and complete mailing
addresses of all directors and executive officers of the applicant and all
persons chosen to become directors or executive officers. Indicate all offices
with the applicant held or to be held by each person named.
<TABLE>
<CAPTION>
NAME ADDRESS OFFICE
<S> <C> <C>
Edward M. Tracy c/o Capital Gaming International, Inc., Director; President and Chief
Bayport One, Suite 250, 8025 Black Horse Executive Officer
Pike, West Atlantic City, New Jersey 08232
Col. Clinton L. Pagano c/o Capital Gaming International, Inc., Director; Executive Vice
Bayport One, Suite 250, 8025 Black Horse President of Compliance
Pike, West Atlantic City, New Jersey 08232
William S. Papazian c/o Capital Gaming International, Inc., Senior Vice President, Secretary
Bayport One, Suite 250, 8025 Black Horse and General Counsel; will become
Pike, West Atlantic City, New Jersey 08232 a Director as of the Effective
Date
Cory H. Morowitz c/o Capital Gaming International, Inc., Acting Chief Financial Officer
Bayport One, Suite 250, 8025 Black Horse
Pike, West Atlantic City, New Jersey 08232
</TABLE>
5. Principal owners of voting securities. Furnish the following information
as to each person owning 10 percent or more of the voting securities of the
applicant.
As of Effective Date
<PAGE>
<TABLE>
<CAPTION>
NAME AND COMPLETE MAILING ADDRESS TITLE OF CLASS OWNED AMOUNT OWNED PERCENTAGE OF VOTING
SECURITIES OWNED
<S> <C> <C> <C>
Grace Brothers Ltd. common stock 400,000 shares 20%
1560 Sherman Avenue
Suite 900
Evanston, IL 60201
Continental Casualty common stock 260,000 13%
c/o Loews Corporation
667 Madison Avenue
New York, NY 10021
Tungsten Asset Management common stock 200,000 10%
121 Outrigger Mall
Marina Del Rey, CA 90292
SunAmerica Inc. common stock 220,000 11%
One SunAmerica Center
Los Angeles, CA 90067
</TABLE>
UNDERWRITERS
6. Underwriters. Give the name and complete mailing address of (a) each person
who, within three years prior to the date of filing the application, acted as an
underwriter of any securities of the obligor which were outstanding on the date
of filing the application and (b) each proposed principal underwriter of the
securities proposed to be offered. As to each person specified in (a), give the
title of each class of securities underwritten.
(a) No person, within three years of the date hereof, acted as a
underwriter of any of the securities of the Company that are
outstanding on the date hereof.
(b) The securities proposed to be offered will be exchanged with
existing security holders without the assistance of any
underwriter.
<PAGE>
CAPITAL SECURITIES
7. Capitalization. (a) Furnish the following information as to each
authorized class of securities of the Applicant.
As of April 10, 1997
<TABLE>
<CAPTION>
<S> <C> <C>
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Common Stock, no par value 75,000,000 shares 19,329,574
Preferred Stock, no par value 5,000,000 shares 0
11 1/2% Senior Secured Notes Payable due $135,000,000 $104,000,000
2001
</TABLE>
As of the Effective Date
<TABLE>
<CAPTION>
<S> <C> <C>
TITLE OF CLASS AMOUNT AUTHORIZED AMOUNT OUTSTANDING
Common Stock, no par value 3,200,000 shares 2,000,000
Preferred Stock, no par value 0 0
12% Senior Secured Notes Payable due $23,100,000 $23,100,000
2001
</TABLE>
(b) Give a brief outline of the voting rights of each class of voting
securities referred to in paragraph (a) above.
With respect to the Common Stock, each holder of a share of Common
Stock is entitled to one vote for each share of Common Stock so held on all
matters on which shareholders are entitled to vote.
With respect to the Preferred Stock, each holder of a share of
Preferred Stock is not entitled to vote on any matter on which shareholders are
entitled to vote.
INDENTURE SECURITIES
8. Analysis of indenture provisions. Insert at this point the analysis of
indenture provisions required under section 305(a)(2) of the Act.
The terms of the indenture securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following is
an analysis of certain terms defined in the Indenture. The following analysis
does not purport to be a complete description of the Indenture provisions
discussed and is qualified in its entirety by express reference
<PAGE>
to the Indenture. (Section references are to the relevant provisions of the
Indenture).
(a) Definition of default; Withholding Notice.
The following events are defined in the Indenture as "Events of Default":
(1) the failure of the Company to pay any installment
of interest on the Securities (other than in respect of the Amended
Original Guaranty) as and when due and payable and the continuance of
any such failure for 10 days;
(2) the failure by the Company (other than in respect
of the Amended Original Guaranty) to pay all or any part of the
principal, or premium, if any, on the Securities when and as the same
become due and payable at maturity, redemption, by acceleration or
otherwise, including, without limitation, failure to pay any Offer to
Purchase Price, or otherwise;
(3) except as provided in clauses (1) or (2) of
Section 7.1, failure to have obtained Advisory Committee approval of a
Definitive Budget pursuant to Section 5.20(a) or failure of the Company
or any Guarantor or any Subsidiary thereof, as applicable, to comply
with any provision of Section 5.3, 5.10, 5.11, 5.12, 5.13, 5.15, 5.17,
5.18, 5.19, 5.20(d) or Section 6.1 which failure continues for 30 days;
(4) except as otherwise provided herein, the failure
by the Company or any Guarantor to observe or perform any other
covenant or agreement contained in the Securities or the Indenture
(other than in each case Amended Original Guaranty Obligations) and the
continuance of such failure for a period of 30 days after written
notice is given to the Company by the Trustee or to the Company and
Trustee by the Holders of at least 25% in aggregate principal amount of
the Securities outstanding;
(5) a decree, judgment, or order by a court of
competent jurisdiction shall have been entered adjudging the Company or
a Subsidiary of the Company as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization of the Company or a
Subsidiary of the Company under any bankruptcy or similar law, and such
decree or order shall have continued undischarged and unstayed for a
period of 60 days; or a decree or order of a court of competent
jurisdiction in respect of the appointment of a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of the Company or a
Subsidiary of the Company, or of the Property of any such person, or
for the winding up or liquidation of the affairs of any such person,
shall have been entered, and such decree, judgment, or order shall have
<PAGE>
remained in force undischarged and unstayed for a period of 60 days;
(6) the Company or a Subsidiary of the Company shall
institute proceedings to be adjudicated a voluntary bankrupt, or shall
consent to the filing of a bankruptcy proceeding against it, or shall
file a petition or answer or consent seeking reorganization under any
bankruptcy or similar law or similar statute, or shall consent to the
filing of any such petition, or shall consent to the appointment of a
Custodian, receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of it or any of its assets or property, or shall make a
general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or
shall, within the meaning of any Bankruptcy Law, become insolvent,
fails generally to pay their debts as they become due, or takes any
corporate action in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing;
(7) a default in the payment of principal, premium or
interest when due which extends beyond any stated period of grace
applicable thereto or an acceleration for any other reason of maturity
of any Indebtedness (excluding Indebtedness described in clause (iii)
of the second proviso to the definition of Indebtedness) of the Company
or any Subsidiary of the Company with an aggregate principal amount in
excess of $500,000;
(8) final unsatisfied judgments not covered by
insurance aggregating in excess of $500,000, at any one time rendered
against the Company or a Subsidiary of the Company and not stayed,
bonded or discharged within 60 days;
(9) an event of default specified in the Mortgage; or
(10) any of the documents comprising the Mortgage
fails to become or ceases to be in full force and effect in accordance
with the terms of the Indenture, or ceases (once effective) to create
in favor of the Trustee, with respect to any material amount of
Collateral, a valid and perfected first priority Lien on the Collateral
to be covered thereby (unless a prior or exclusive Lien is specifically
permitted by the Indenture).
If a Default occurs and is continuing, the Trustee must,
within 90 days after the occurrence of such default, give to the Holders notice
of such default.
(b) Authentication and Delivery; Application of Proceeds.
A Security will not be valid until an authorized signatory of
the Trustee manually signs the certificate of authentication on the Security,
but such signature shall be
<PAGE>
conclusive evidence that the Security has been authenticated pursuant to the
term of the Indenture.
The Trustee shall authenticate Securities for original issue
in the aggregate principal amount of up to $23,100,000 upon a written order of
the Company in the form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Securities to be authenticated and the date on which
the Securities are to be authenticated. The aggregate principal amount of
Securities (other than in respect of the Amended Original Guaranty) outstanding
at any time may not exceed $23,100,000, except as provided in Section 2.7. Upon
the written order of the Company in the form of an Officers' Certificate, the
Trustee shall authenticate Securities in substitution of Securities originally
issued to reflect any name change of the Company.
Securities shall be issuable only in registered form without
coupons in denominations of $100 and any integral multiple thereof or such
smaller denominations as are required to comply with the Plan.
The Securities will be issued in exchange for claims and
interests as provided in the Plan, and accordingly, the issuance of the
Securities will not result in proceeds to the Company.
(c) Release and Substitution of Property Subject to the Lien of the
Indenture.
Subject to applicable law, the release of any Collateral from
Liens created by the Mortgage or the release of, in whole or in part, the Liens
created by the Mortgage, will not be deemed to impair the Mortgage in
contravention of the provisions of the Indenture if and to the extent the
Collateral or Liens are released pursuant to, and in accordance with, the
applicable agreement creating the Mortgage and pursuant to, and in accordance
with, the terms hereof. To the extent applicable, without limitation, the
Company and each obligor on the Securities shall cause Trust Indenture Act ss.
314(d) relating to the release of Property or securities from the Liens of the
Mortgage to be complied with. Any certificate or opinion required by TIA ss.
314(d) may be made by one officer prior to the qualification of the Indenture
under the TIA and by two officers after such qualification, except in cases
which Trust Indenture Act ss. 314(d) requires that such certificate or opinion
be made by an independent person.
Upon written request of the Company, subject to applicable
law, and presentation to the Collateral Agent of an Officers' Certificate
evidencing compliance with Section 5.14, the Collateral Agent shall release
funds (and the Trustee's Lien with respect thereto) in accordance with the terms
of the Cash Collateral and Disbursement Agreement; provided, that the Lien on
the funds so released shall immediately attach in like manner to
<PAGE>
the assets and property purchased by the Company with such
funds (except to the extent such funds are applied to the repayment of
Securities in compliance with the requirements of the Indenture) to the extent
required by the Indenture.
(d) Satisfaction and Discharge
The Company shall be deemed to have paid and discharged the
entire Indebtedness on the Securities and the provisions of the Indenture shall
cease to be of further effect (subject to the survival of certain provisions of
the Indenture), if:
(1) The Company irrevocably deposits in trust with
the Trustee, pursuant to an irrevocable trust and security agreement in
form and substance reasonably satisfactory to the Trustee, (i) U.S.
Legal Tender, (ii) U.S. Government Obligations, or (iii) a combination
thereof, in an amount after payment of all Federal, state and local
taxes or other charges or assessments in respect thereof payable by the
Trustee, which through the payment of principal and interest will
provide, not later than one Business Day before the due date of payment
in respect of the Securities, U.S. Legal Tender in an amount which, in
the opinion of a nationally recognized firm of independent certified
public accountants expressed in a written certification thereof (in
form and substance reasonably satisfactory to the Trustee) delivered to
the Trustee, is sufficient to pay the principal of, premium, if any,
and each installment of principal and interest on the Securities (other
than in respect of the Amended Original Guaranty) then outstanding on
the dates on which any such payments are due and payable in accordance
with the terms of the Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee
to have a conflicting interest as defined in and for purposes of the
TIA;
(3) No Default or Event of Default shall have
occurred or be continuing on the date of such deposit or shall occur on
or before the 91st day (or one day after such other greater period of
time in which any such deposit of trust funds may remain subject to
bankruptcy or insolvency laws) after the date of such deposit, and such
deposit will not result in a Default or Event of Default under the
Indenture or a breach or violation of, or constitute a default under,
any other instrument to which the Company, any Guarantor or any
Subsidiary of the Company or the Guarantor is a party or by which it or
its Property is bound;
(4) The deposit, defeasance and discharge will not be
deemed, or result in, a Federal income taxable event to the Holders of
such Securities and the Holders will be subject to Federal income tax
only in the same amounts and in the
<PAGE>
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(5) The deposit shall not result in the Company,
the Trustee or the trust becoming an "investment company" under the
Investment Company Act of 1940;
(6) After the passage of 91 days (or any greater
period of time in which any such deposit of trust funds may remain
subject to any Bankruptcy Laws insofar as those laws apply to the
Company) following the deposit of the trust funds, such funds will not
be subject to any Bankruptcy Laws affecting creditors' rights
generally;
(7) Holders of such Securities will have a valid,
perfected and unavoidable first-priority security interest in the trust
funds; and
(8) The Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel (who may be outside
counsel to the Company, but not in-house counsel to the Company or any
of its Subsidiaries), each in form and substance satisfactory to the
Trustee, stating that all conditions precedent specified herein
relating to the defeasance contemplated by Section 9.1 have been
complied with.
In the event all or any portion of such Securities are to be
redeemed through such irrevocable trust, the Company must make arrangements
satisfactory to the Trustee, at the time of such deposit, for the giving of the
notice of such redemption or redemptions by the Trustee in the name and at the
expense of the Company.
(e) Evidence of Compliance
The Company shall deliver to the Trustee within 90 days after the end
of its fiscal year an Officers' Certificate complying (whether or not required)
with Section 314(a)(4) of the TIA and stating that a review of its activities
and the activities of its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether the Company has kept, observed, performed and fulfilled its obligations
under the Indenture and further stating, as to each such Officer signing such
certificate, whether or not the signer knows of any failure of the Company, any
Guarantor or any Subsidiary of the Company or any Guarantor to comply with any
conditions or covenants in the Indenture and, if such signer does know of such a
failure to comply, the certificate shall describe such failure with
particularity. The Officers' Certificate shall also notify the Trustee should
the relevant fiscal year end on any date other than the current fiscal year end
date.
<PAGE>
9. Other obligors. Give the name and complete mailing address of any
person, other than the Applicant, who is an obligor upon the indenture
securities.
Capital Gaming Management Inc.
c/o Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, New Jersey 08232
<PAGE>
CONTENTS
Contents of application for qualification. This application for
qualification comprises--
(a) Pages numbered 1 to ____, consecutively.
(b) The statement of eligibility and qualification of each trustee under
the indenture to be qualified.
(c) The following exhibits in addition to those filed as a part of the statement
of eligibility and qualification of each trustee.
EXHIBIT PAGE
T3A-1 Restated Certificate of Incorporation (Incorporated by
reference to exhibit 3.1 filed in connection with the
Applicant's Form 10-K filed with the Securities and Exchange
Commission on September 28, 1994).
T3A-2 Amended and Restated Certificate of Incorporation
as of Effective Date (Incorporated by reference to exhibit
2.1 filed in connection with the Applicant's Form 8-K filed
with the Securities and Exchange Commission on April 3,
1997).
T3B Bylaws (Incorporated by reference to exhibit 3.2 filed in
connection with the Applicant's Form 10-K filed with the
Securities and Exchange Commission on September 28, 1993).
T3C Form of Indenture, including exhibits thereto
T3E Disclosure Statement
T3F See the cross-reference sheet following the cover page of the
Indenture of the provisions inserted therein pursuant to
Section 310 through 318(a), inclusive, of the Trust Indenture
Act of 1939 (contained in Exhibit T3C hereof)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
applicant, Capital Gaming International, Inc., a corporation organized and
existing under the laws of New Jersey, has duly caused this application to be
signed on its behalf by the undersigned, thereunto duly authorized , and its
seal to be hereunto affixed and attested, all in the city of West Atlantic City
and State of New Jersey on the 10th day of April, 1997.
(SEAL)
CAPITAL GAMING INTERNATIONAL, INC.
By /s/ William S. Papazian
William S. Papazian
Senior Vice-President and General
Counsel
Attest /s/ Edward M. Tracy
Edward M. Tracy
Chairman and CEO
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM T-1
Statement of Eligibility Under the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
FIRST TRUST NATIONAL ASSOCIATION
(Exact name of Trustee as specified in its charter)
United States 41-0257700
(State of Incorporation) (I.R.S. Employer Identification No.)
First Trust Center
180 East Fifth Street
St. Paul, Minnesota 55101
(Address of Principal Executive Offices) (Zip Code)
CAPITAL GAMING INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-3061189
(State of Incorporation) (I.R.S. Employer Identification No.)
Bayport One, Suite 250
8025 Black Horse Pike
West Atlantic City, New Jersey 08232
(Address of Principal Executive Offices) (Zip Code)
12% Senior Secured Notes due 2001
(Title of the Indenture Securities)
<PAGE>
GENERAL
1. General Information Furnish the following information as to the Trustee.
(a) Name and address of each examining or supervising authority
to which it is subject.
Comptroller of the Currency
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any
underwriter for the obligor is an affiliate of the Trustee, describe each
such affiliation.
None
See Note following Item 16.
Items 3-15 are not applicable because to the best of the Trustee's
knowledge the obligor is not in default under any Indenture for which the
Trustee acts as Trustee.
16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement
of eligibility and qualification. Each of the exhibits listed below is
incorporated by reference from registration number 22-25656.
1. Copy of Articles of Association.
2. Copy of Certificate of Authority to Commence Business.
3. Authorization of the Trustee to exercise corporate trust powers
(included in Exhibits 1 and 2; no separate instrument).
4. Copy of existing By-Laws.
5. Copy of each Indenture referred to in Item 4. N/A.
6. The consents of the Trustee required by Section 321(b) of the act.
7. Copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or
examining authority.
<PAGE>
NOTE
The answers to this statement insofar as such answers relate to what
persons have been underwriters for any securities of the obligors within three
years prior to the date of filing this statement, or what persons are owners of
10% or more of the voting securities of the obligors, or affiliates, are based
upon information furnished to the Trustee by the obligors. While the Trustee has
no reason to doubt the accuracy of any such information, it cannot accept any
responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, First Trust National Association, an Association organized and existing
under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, and its seal to be hereunto affixed and attested, all
in the City of Saint Paul and State of Minnesota on the 7th day of April, 1997.
FIRST TRUST NATIONAL ASSOCIATION
[SEAL]
/s/ Richard H. Prokosch
-------------------------------------
Richard H. Prokosch
Trust Officer
/s/ Christina Hatfield
- ---------------------------------------
Christina Hatfield
Assistant Secretary
<PAGE>
EXHIBIT 6
CONSENT
In accordance with Section 321(b) of the Trust Indenture Act of 1939, the
undersigned, FIRST TRUST NATIONAL ASSOCIATION hereby consents that reports of
examination of the undersigned by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon its request therefor.
Dated: April 7, 1997
FIRST TRUST NATIONAL ASSOCIATION
/s/ Richard H. Prokosch
------------------------------------
Richard H. Prokosch
Trust Officer
<PAGE>
===============================================================================
CAPITAL GAMING INTERNATIONAL, INC.
Issuer
and
THE GUARANTOR NAMED HEREIN
and
FIRST TRUST NATIONAL ASSOCIATION
Trustee
------------------------
AMENDED AND RESTATED INDENTURE
Dated as of February 17, 1994
and
Amended and Restated as of March 27, 1997
------------------------
$23,100,000
12.0% Senior Secured Notes due 2001
===============================================================================
<PAGE>
Trust Indenture Act Section Indenture Section
- --------------------------- -----------------
ss. 310(a)(1)........................................................8.10
(a)(2)......................................................8.10
(a)(3)......................................................N.A.
(a)(4)......................................................N.A.
(a)(5)......................................................8.10
(b)..............................................8.8; 8.10; 14.2
(c).........................................................N.A.
ss. 311(a) 8.11
(b).........................................................8.11
(c).........................................................N.A.
ss. 312(a) 2.5
(b).........................................................14.3
(c).........................................................14.3
ss. 313(a) 8.6
(b)(1)......................................................N.A.
(b)(2).......................................................8.6
(c)....................................................8.6; 14.2
(d)..........................................................8.6
ss. 314(a) 5.8; 13.2
(b)..........................................................4.2
(c)(1)............................................2.2; 8.2; 14.4
(c)(2).......................................................8.2
(c)(3).......................................................4.2
(d)..........................................................4.2
(e).........................................................14.5
(f).........................................................N.A.
ss. 315(a) 8.1
(b)...............................................8.5; 8.6; 14.2
(c).......................................................8.1(a)
(d)...............................................2.8; 7.12; 8.1
(e).........................................................7.14
ss. 316(a)(last sentence)...............................................2.9
(a)(1)(A)...................................................7.12
(a)(1)(B)...................................................7.13
(a)(2)......................................................N.A.
(b)....................................................7.13; 7.8
ss. 317(a)(1)...........................................................7.3
(a)(2).......................................................7.4
(b)..........................................................2.4
ss. 318(a) 14.1
- ---------------
N.A. means Not Applicable.
This Cross-Reference Table shall not, for any purpose, be deemed to be a part of
the Indenture.
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TABLE OF CONTENTS
-----------------
Page
Article I. DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. DEFINITIONS........................................2
SECTION 1.2. INCORPORATION BY REFERENCE OF TIA.................28
SECTION 1.3. RULES OF CONSTRUCTION.............................28
Article II. THE SECURITIES
SECTION 2.1. FORM AND DATING...................................29
SECTION 2.2. EXECUTION AND AUTHENTICATION......................29
SECTION 2.3. REGISTRAR AND PAYING AGENT........................30
SECTION 2.4. PAYING AGENT TO HOLD ASSETS IN TRUST..............31
SECTION 2.5. SECURITYHOLDER LISTS..............................31
SECTION 2.6. TRANSFER AND EXCHANGE.............................32
SECTION 2.7. REPLACEMENT SECURITIES............................32
SECTION 2.8. OUTSTANDING SECURITIES............................33
SECTION 2.9. TREASURY SECURITIES...............................33
SECTION 2.10. TEMPORARY SECURITIES.............................33
SECTION 2.11. CANCELLATION.....................................34
SECTION 2.12. DEFAULTED INTEREST...............................34
Article III. REDEMPTION
SECTION 3.1. RIGHT OF REDEMPTION...............................34
SECTION 3.2. MANDATORY SINKING FUND; PAYMENTS AND CREDITS......35
SECTION 3.3. REDEMPTION PURSUANT TO GAMING LAWS................35
SECTION 3.4. NOTICES TO TRUSTEE................................36
SECTION 3.5. SELECTION OF SECURITIES TO BE REDEEMED............36
SECTION 3.6. NOTICE OF REDEMPTION..............................37
SECTION 3.7. EFFECT OF NOTICE OF REDEMPTION....................38
SECTION 3.8. DEPOSIT OF REDEMPTION PRICE.......................38
SECTION 3.9. SECURITIES REDEEMED IN PART.......................39
Article IV. SECURITY
SECTION 4.1. SECURITY INTEREST.................................39
SECTION 4.2. RECORDING; OPINIONS OF COUNSEL....................39
SECTION 4.3. DISPOSITION OF THE COLLATERAL.....................40
SECTION 4.4. NET CASH PROCEEDS ACCOUNT.........................42
SECTION 4.5. CERTAIN RELEASES OF COLLATERAL....................42
SECTION 4.6. PAYMENT OF EXPENSES...............................43
SECTION 4.7. SUITS TO PROTECT THE COLLATERAL...................43
SECTION 4.8. TRUSTEE'S DUTIES..................................44
SECTION 4.9. EXCESS CASH COLLATERAL ACCOUNT....................44
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Article V. COVENANTS
SECTION 5.1. PAYMENT OF SECURITIES.............................45
SECTION 5.2. MAINTENANCE OF OFFICE OR AGENCY...................45
SECTION 5.3. LIMITATION ON RESTRICTED PAYMENTS.................46
SECTION 5.4. CORPORATE EXISTENCE...............................47
SECTION 5.5. PAYMENT OF TAXES AND OTHER CLAIMS.................47
SECTION 5.6. MAINTENANCE OF INSURANCE..........................48
SECTION 5.7. COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.........48
SECTION 5.8. REPORTS...........................................48
SECTION 5.9. WAIVER OF STAY, EXTENSION OR USURY LAWS...........49
SECTION 5.10. LIMITATION ON TRANSACTIONS WITH AFFILIATES.......49
SECTION 5.11. LIMITATION ON INCURRENCE OF ADDITIONAL
INDEBTEDNESS....................................50
SECTION 5.12. LIMITATION ON DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.............51
SECTION 5.13. LIMITATION ON LIENS..............................52
SECTION 5.14. LIMITATION ON SALES OF ASSETS AND
SUBSIDIARY STOCK; EVENT OF LOSS.................53
SECTION 5.15. MAINTENANCE OF CONSOLIDATED COVERAGE RATIO.......57
SECTION 5.16. CONDUCT OF BUSINESS..............................57
SECTION 5.17. LIMITATION ON STATUS AS INVESTMENT COMPANY.......57
SECTION 5.18. AUTHORIZED TRANSACTIONS..........................57
SECTION 5.19. BANK ACCOUNTS....................................58
SECTION 5.20. EXCESS CASH......................................58
SECTION 5.21. ISSUANCE OF COMMON STOCK.........................60
Article VI. SUCCESSOR CORPORATION
SECTION 6.1. LIMITATION ON MERGER, SALE OR
SECURITIES CONSOLIDATION.........................61
SECTION 6.2. SUCCESSOR CORPORATION SUBSTITUTED.................62
Article VII. EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1. EVENTS OF DEFAULT.................................62
SECTION 7.2. ACCELERATION OF MATURITY DATE; RESCISSION
AND ANNULMENT....................................65
SECTION 7.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE...........................66
SECTION 7.4. TRUSTEE MAY FILE PROOFS OF CLAIM..................67
SECTION 7.5. TRUSTEE MAY ENFORCE CLAIMS WITHOUT
POSSESSION OF SECURITIES.........................68
SECTION 7.6. PRIORITIES........................................68
SECTION 7.7. LIMITATION ON SUITS...............................69
SECTION 7.8. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST..................70
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SECTION 7.9. RIGHTS AND REMEDIES CUMULATIVE....................70
SECTION 7.10. DELAY OR OMISSION NOT WAIVER.....................70
SECTION 7.11. CONTROL BY HOLDERS...............................70
SECTION 7.12. WAIVER OF PAST DEFAULT...........................71
SECTION 7.13. UNDERTAKING FOR COSTS............................71
SECTION 7.14. RESTORATION OF RIGHTS AND REMEDIES...............72
SECTION 7.15. CASH PROCEEDS FROM COLLATERAL....................72
Article VIII. TRUSTEE
SECTION 8.1. DUTIES OF TRUSTEE.................................72
SECTION 8.2. RIGHTS OF TRUSTEE.................................73
SECTION 8.3. INDIVIDUAL RIGHTS OF TRUSTEE......................74
SECTION 8.4. TRUSTEE'S DISCLAIMER..............................74
SECTION 8.5. NOTICE OF DEFAULT.................................75
SECTION 8.6. REPORTS BY TRUSTEE TO HOLDERS.....................75
SECTION 8.7. COMPENSATION AND INDEMNITY........................75
SECTION 8.8. REPLACEMENT OF TRUSTEE............................76
SECTION 8.9. SUCCESSOR TRUSTEE BY MERGER, ETC..................77
SECTION 8.10. ELIGIBILITY; DISQUALIFICATION....................78
SECTION 8.11. PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY.................................78
Article IX. SATISFACTION AND DISCHARGE
SECTION 9.1. SATISFACTION AND DISCHARGE OF THE INDENTURE.......78
SECTION 9.2. TERMINATION OF OBLIGATIONS UPON CANCELLATION
OF THE SECURITIES................................80
SECTION 9.3. SURVIVAL OF CERTAIN OBLIGATIONS...................80
SECTION 9.4. ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE............81
SECTION 9.5. APPLICATION OF TRUST ASSETS.......................81
SECTION 9.6. REPAYMENT TO THE COMPANY..........................81
SECTION 9.7. REINSTATEMENT.....................................82
Article X. AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.1. SUPPLEMENTAL INDENTURES WITHOUT CONSENT
OF HOLDERS......................................82
SECTION 10.2. AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS
WITH CONSENT OF HOLDERS.........................83
SECTION 10.3. COMPLIANCE WITH TIA..............................85
SECTION 10.4. REVOCATION AND EFFECT OF CONSENTS................85
SECTION 10.5. NOTATION ON OR EXCHANGE OF SECURITIES............86
SECTION 10.6. TRUSTEE TO SIGN AMENDMENTS, ETC..................86
Article XI. MEETINGS OF SECURITYHOLDERS
SECTION 11.1. PURPOSES FOR WHICH MEETINGS MAY BE CALLED........86
SECTION 11.2. MANNER OF CALLING MEETINGS.......................87
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SECTION 11.3. CALL OF MEETINGS BY COMPANY OR HOLDERS...........87
SECTION 11.4. WHO MAY ATTEND AND VOTE AT MEETINGS..............88
SECTION 11.5. REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT
OF THE MEETING; VOTING RIGHTS; ADJOURNMENT......88
SECTION 11.6. VOTING AT THE MEETING AND RECORD TO BE KEPT......89
SECTION 11.7. EXERCISE OF RIGHTS OF TRUSTEE OR
SECURITYHOLDERS MAY NOT BE HINDERED OR
DELAYED BY CALL OF MEETING......................89
ARTICLE XII.INDEMNIFICATION OF ADVISORY COMMITTEE; EXPENSES
SECTION 12.1. INDEMNITY........................................90
Article XIII. GUARANTIES
SECTION 13.1. AMENDED ORIGINAL GUARANTY........................91
SECTION 13.2. GUARANTY.........................................92
SECTION 13.3. EXECUTION AND DELIVERY OF GUARANTY...............93
SECTION 13.4. FUTURE GUARANTORS................................94
SECTION 13.5. CERTAIN BANKRUPTCY EVENTS........................94
Article XIV. MISCELLANEOUS
SECTION 14.1. TIA CONTROLS.....................................94
SECTION 14.2. NOTICES..........................................94
SECTION 14.3. COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.....95
SECTION 14.4. CERTIFICATE AND OPINION AS TO
CONDITIONS PRECEDENT............................95
SECTION 14.5. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION....96
SECTION 14.6. RULES BY TRUSTEE, PAYING AGENT, REGISTRAR........96
SECTION 14.7. LEGAL HOLIDAYS...................................96
SECTION 14.8. GOVERNING LAW....................................97
SECTION 14.9. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS....97
SECTION 14.10. NO RECOURSE AGAINST OTHERS......................97
SECTION 14.11. SUCCESSORS......................................97
SECTION 14.12. DUPLICATE ORIGINALS.............................98
SECTION 14.13. SEVERABILITY....................................98
SECTION 14.14. TABLE OF CONTENTS, HEADINGS, ETC................98
EXHIBITS
Exhibit A -- Form of Security
Exhibit B -- Form of Guaranty
Exhibit C -- Form of Pledge Agreement
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AMENDED AND RESTATED INDENTURE, dated as of February 17, 1994 and
amended and restated as of March 27, 1997, among Capital Gaming International
Inc., a New Jersey corporation (the "Company"), the Guarantor referred to below
and First Trust National Association, as Trustee.
W I T N E S S E T H
WHEREAS the Company, its Subsidiaries (as guarantors) and First
National Trust Association (as trustee) are parties to an Indenture, dated as of
February 14, 1994 (the "Original Indenture"); and
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Company, the Guarantor and the Trustee desire to amend and restate in
its entirety the Original Indenture in the form of this Indenture.
NOW, THEREFORE, each party hereto agrees as follows for the benefit of
each other party and for the equal and ratable benefit of the Holders of the
Securities:
ARTICLE I.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
"Acceleration Notice" shall have the meaning specified in Section 7.1.
"Acceptance Amount" shall have the meaning specified in Section 5.14.
"Accumulated Amount" shall have the meaning specified in Section 5.14.
"Acquired Indebtedness" means Indebtedness of any person existing at
the time such person becomes a Subsidiary of such person or is merged or
consolidated into or with such person or one of its subsidiaries, and not
incurred in connection with or in anticipation of, such merger or consolidation
or such person becoming a Subsidiary of such person.
"Acquisition" means the purchase or other acquisition of any person or
substantially all the assets of any person by any other person, whether by
purchase, merger, consolidation or other transfer, and whether or not for
consideration.
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"Additional Transaction" shall have the meaning specified in Section
5.20(c).
"Adjusted Consolidated Fixed Charges" means (i) in the case of the
Company and its Subsidiaries, Consolidated Fixed Charges less Consolidated Fixed
Charges in respect of Permitted Indebtedness, in each case, of the Company and
its Subsidiaries and (ii) in all other cases, the Consolidated Fixed Charges of
a person and its Consolidated Subsidiaries.
"Advisory Committee" means the advisory committee of the Company
consisting initially of members who shall be Holders or nominees of Holders
whose appointment is approved by the Bankruptcy Court (the "Approved Members")
and, after the Issue Date, having such other replacement or additional members
as Holders of a majority in principal amount of Securities (other than in
respect of the Amended Original Guaranty) outstanding may determine in
accordance with the terms hereof; provided, that such other replacement or
additional members shall be reasonably acceptable to the Company and that each
replacement or additional member of the Advisory Committee must meet at all
times the following minimum qualifications or shall be disqualified from service
on the Advisory Committee (unless the Company waives the following requirements
and approves such member, in which case such member shall also be an Approved
Member):
1. the replacement or additional member shall not (a) have any conflict
of interest that would impair such member's ability to serve fairly and
impartially, (b) otherwise have a material equity interest in or relationship
with an entity that is in direct competition with the Company or (c) currently
serve as an officer or director of a gaming company; and
2. the replacement or additional member generally shall be of good
character and reputation.
Members of the Advisory Committee shall serve as fiduciaries to the Holders.
Members of the Advisory Committee may rely on information provided by the
Company with respect to any transaction without further investigation or
inquiry. Each member of the Advisory Committee shall execute, prior to becoming
a member thereof, a confidentiality agreement with the Company in form and
substance reasonably satisfactory to the Company. Members of the Advisory
Committee may be removed at any time, with or without cause, by action of
Holders of 66 2/3% in principal amount of Securities (other than in respect of
the Amended Original Guaranty) outstanding excluding any Securities held
beneficially or of record by directors or officers of the Company, in accordance
with the terms hereof.
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The Company may, from time to time, submit for the approval of the Advisory
Committee any transaction to be entered into by the Company and/or its
Subsidiaries, including any contract, agreement, understanding, loan, advance or
guarantee, and including any series of related transactions, such submission to
be deemed made if sent by overnight courier or hand delivered to all members of
the Advisory Committee at their last known address and to the Trustee as set
forth in Section 14.2 hereof.
If the Advisory Committee fails to disapprove of any such transaction within
five Business Days after the date on which the proposal in respect thereof was
submitted thereto, such transaction shall be deemed approved and shall for all
purposes of this Indenture be deemed to be an Authorized Transaction. If the
Advisory Committee shall disapprove any such transaction submitted to it by the
Company, it shall provide to the Company, by overnight courier or hand delivery,
within fifteen (15) Business Days after the date on which such proposal was
submitted, an affidavit setting forth the reasons for such disapproval and a
certificate which certifies that such disapproval was made in good faith and, in
the Advisory Committee's opinion, in the best interests of the Company and in
the best interests of the Holders and that such decision was not influenced in
any way by interests of the members of the Advisory Committee which are adverse
to the interests of the Company; provided, however if the Advisory Committee
disapproves a transaction and fails to provide the affidavit and certificate
within 15 Business Days, the Advisory Committee shall provide any such affidavit
and certificate within ten (10) calendar days after the date on which a proposal
is submitted. If the Advisory Committee fails to provide such affidavit and
certificate within the required time, such transaction shall be deemed approved
and shall for all purposes of this Indenture be deemed to be an Authorized
Transaction. All actions of the Advisory Committee shall require the affirmative
vote of a majority of its members.
If the Advisory Committee disapproves a transaction and it is later determined
that a member of the Advisory Committee has not met the minimum requirements in
paragraphs 1 through 4 above, if such member is not an Approved Member, such
member's vote shall be deemed to have been void with respect to such
disapproval. If the Advisory Committee fails to disapprove a transaction and it
is later determined that a member of the Advisory Committee has not met the
minimum requirements in paragraphs 1 through 4 above, such transaction shall
continue to be an Authorized Transaction.
Subject in all respects to the terms of this Indenture, the Advisory Committee
may adopt by-laws which would govern the election of Advisory Committee members
and set forth the rules and operating procedures of the Advisory Committee. The
Advisory
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Committee shall promptly deliver a copy of its adopted by-laws to the Company.
The Advisory Committee shall be disbanded and cease to exist on the Termination
Date.
"Affiliate" means (i) any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or its
Subsidiaries, (ii) any spouse, immediate family member, or other relative who
has the same principal residence of any person described in clause (i) above,
and (iii) any trust in which any person described in clause (i) or (ii) above
has a beneficial interest. For purposes of this definition, the term "control"
means (a) the power to direct the management and policies of a person, directly
or through one or more intermediaries, whether through the ownership of voting
securities, by contract, or otherwise, or (b) the beneficial ownership of 10% or
more of any class of voting Capital Stock of a person (on a fully diluted basis)
or of warrants or other rights to acquire such class of Capital Stock (whether
or not presently exercisable).
"Affiliate Transaction" shall have the meaning specified in Section
5.10.
"Agency Agreement" means an agreement between the Company or a
Subsidiary of the Company, whichever of such persons holds the relevant account,
the Collateral Agent (or an Affiliate thereof) and a bank described in clause
(ii) of the definition of Cash Equivalent (except that the capital and surplus
thereof need only be in excess of $250,000,000), substantially in the form of
Exhibit A to the Cash Collateral and Disbursement Agreement.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Amended Budget" shall have the meaning specified in Section 5.20(b).
"Amended Original Guaranty" shall have the meaning specified in Section
13.1.
"Amended Original Guaranty Obligations" means the obligations of the
Original Guarantor, now or hereafter existing, to pay principal of and premium,
if any, and interest on the Amended Original Guaranty when due and payable, by
acceleration, call for redemption or otherwise, and interest on the overdue
principal and premium, if any, of, and (to the extent lawful) interest, if any,
thereon, and all other amounts due or to become due in connection with the
Amended Original Guaranty, including
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any and all extensions, renewals or other modifications thereof, in whole or in
part, and the performance of all other obligations of the Original Guarantor,
including all costs and expenses incurred by the Trustee or the Holders in the
collection or enforcement of any such obligations.
"Approvals" means all approvals, licenses (including Gaming Licenses),
permits, authorizations, findings and other filings necessary under applicable
Gaming Laws; provided, however, that with respect to any Native American Casino,
"Approval" shall mean all approvals of the National Indian Gaming Commission or
any successor entity thereof to be obtained or made by the Company or any of its
Subsidiaries, as applicable, with respect to a Native American Casino Management
Contract.
"Asset Sale" shall have the meaning specified in Section 5.14.
"Asset Sale Offer" shall have the meaning specified in Section 5.14.
"Asset Sale Offer Amount" shall have the meaning specified in Section
5.14.
"Asset Sale Offer Period" shall have the meaning specified in Section
5.14.
"Asset Sale Offer Price" shall have the meaning specified in Section
5.14.
"Asset Sale Purchase Date" shall have the meaning specified in Section
5.14.
"Asset Sale Put Date" shall have the meaning specified in Section 5.14.
"Assignment of Rights" means the Assignment of Rights Pursuant to
Native American Casino Management Contract, dated as of February 17, 1994, with
respect to the Native American Casinos owned by the Umatilla, Muckleshoot and
Tonto Apache Native American Tribes in Auburn, Washington, Pendleton, Oregon and
Payson, Arizona, respectively, from CGMI, as Assignor, to the Trustee for the
benefit of the Holders (other than in respect of the Amended Original Guaranty),
as the same may be amended from time to time in accordance with the terms
thereof.
"Authorized Transaction" means any transaction, including any contract,
agreement, understanding, loan, advance or guarantee, and including any series
of related transactions,
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approved (or deemed approved in accordance with Section 5.18 hereof) by the
Advisory Committee.
"Average Life" means, as of the date of determination, with respect to
any security or instrument, the quotient obtained by dividing (i) the sum of the
products of the number of years from the date of determination to the dates of
each successive scheduled principal (or redemption) payment of such security or
instrument multiplied by the amount of such principal (or redemption) payment by
(ii) the sum of all such principal (or redemption) payments.
"Bankruptcy Court" means the United States Bankruptcy Court for the
District of New Jersey.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any person, the Board of
Directors of such person or any committee of the Board of Directors of such
person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such person.
"Board Resolution" means, with respect to any person, a duly adopted
resolution of the Board of Directors of such person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in New York, New York
are authorized or obligated by law or executive order to close.
"Capital Stock" means, (i) with respect to any corporation, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests (however designated) in stock issued by that
corporation, and (ii) with respect to any other person, any ownership interest
therein.
"Capitalized Lease Obligation" means obligations under a lease, entered
into on or after the Issue Date, that are required to be capitalized for
financial reporting purposes in accordance with GAAP, and the amount of
Indebtedness represented by such obligations shall be the capitalized amount of
such obligations, as determined in accordance with GAAP.
"Cash" means U.S. Legal Tender or U.S. Government Obligations.
"Cash Collateral" shall have the meaning specified in Section 4.4(a).
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"Cash Collateral and Disbursement Agreement" means the Cash (and Excess
Cash) Collateral and Disbursement Agreement, dated the date hereof, among the
Trustee, the Company, each Guarantor and First Trust National Association, as
Collateral Agent, as the same may be amended from time to time in accordance
with the terms thereof.
"Cash Equivalent" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (ii) time deposits and
certificates of deposit and commercial paper issued by the parent corporation of
any domestic commercial bank, of recognized standing having capital and surplus
in excess of $500,000,000, and commercial paper issued by others rated at least
A-2 or the equivalent thereof by Standard & Poor's Corporation or at least P-2
or the equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments in
money market funds substantially all of whose assets comprise securities of the
types described in clauses (i) and (ii) above.
"Casino" means a gaming establishment owned, operated or managed by the
Company or a Subsidiary of the Company dedicated to the operation of games of
chance, and any hotel, building, restaurant, theater, parking facilities, retail
shops, land, equipment and other property or asset directly ancillary thereto or
used in connection therewith. Notwithstanding the foregoing, each Native
American Casino operated by the Company or any Subsidiary of the Company
pursuant to a Native American Casino Management Contract shall constitute a
"Casino" for purposes of this definition.
"CDGC" means Capital Development Gaming Corp., a Rhode Island
corporation and wholly owned Subsidiary of the Company.
"CDGC Notes" means Indebtedness of CDGC and its Subsidiaries
(determined without regard to clause (i) of the second proviso to the definition
of Indebtedness or clause (iv) of such proviso, insofar as it applies to each
clause (i)), which Indebtedness is (a) secured by a Lien (senior to all other
volitional Liens) in favor of the person holding the same on all the assets,
tangible or intangible, then or thereafter existing and all proceeds thereof, of
CDGC and its Subsidiaries; provided that the Lien in favor of such holder shall
be pari passu with the Liens in favor of holders of all other CDGC Notes,
whether outstanding at the time of the issuance of such note or thereafter
outstanding, and (b) pledged to the Trustee for the
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benefit of the Holders of Securities (other than in respect of the Amended
Original Guaranty) pursuant to the Pledge Agreement.
"CDGC Project" means the proposed project of the Narragansett Native
American Tribe to develop a Class II and/or Class III Native American Casino.
"CGMI" means Capital Gaming Management, Inc., a New Jersey corporation
and wholly owned Subsidiary of the Company.
"Collateral" means the Property and assets (including, without
limitation, notes evidencing loans permitted pursuant to Section 5.3(b)(vii)
hereof) of the Company and the Guarantor which is subject to the Liens created
by the Mortgage.
"Common Stock" shall mean the Common Stock, no par value, of the
Company now or hereafter issued.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture and thereafter means such
successor.
"Consolidated Coverage Ratio" of any person on any date of
determination (the "Transaction Date") means, the ratio, on a pro forma basis,
of (a) the aggregate amount of Consolidated EBITDA of such person attributable
to continuing operations and businesses (exclusive of amounts attributable to
operations and businesses permanently discontinued or disposed of, for the
Reference Period) to (b) the aggregate Adjusted Consolidated Fixed Charges of
such person (exclusive of amounts attributable to operations and businesses
permanently discontinued or disposed of but only to the extent that the
obligations giving rise to such Adjusted Consolidated Fixed Charges would no
longer be obligations contributing to such person's Adjusted Consolidated Fixed
Charges subsequent to the Transaction Date) during the Reference Period;
provided, that for purposes of such calculation, (i) Acquisitions which occurred
during the Reference Period or subsequent to the Reference Period and on or
prior to the date of the transaction giving rise to the need to calculate the
Consolidated Coverage Ratio shall be assumed to have occurred on the first day
of the Reference Period, (ii) transactions giving rise to the need to calculate
the Consolidated Coverage Ratio shall be assumed to have occurred on the first
day of the Reference Period, (iii) the incurrence of any Indebtedness or
issuance of any Disqualified Capital Stock during the Reference Period or
subsequent to the Reference Period and on or prior to the Transaction Date (and
the application of the proceeds therefrom to the extent used to refinance or
retire other Indebtedness) shall be assumed to have occurred on the first day of
such Reference Period, and (iv) the Adjusted Consolidated
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Fixed Charges of such person attributable to interest on any Indebtedness or
dividends on any Disqualified Capital Stock bearing a floating interest (or
dividend) rate shall be computed on a pro forma basis as if the average rate in
effect from the beginning of the Reference Period to the Transaction Date had
been the applicable rate for the entire period, unless such person or any of its
Consolidated Subsidiaries is a party to an Interest Swap Obligation (which shall
remain in effect for the 12-month period immediately following the Transaction
Date) that has the effect of fixing the interest rate on the date of
computation, in which case such rate (whether higher or lower) shall be used.
"Consolidated Depreciation and Amortization" for any person means the
total depreciation and amortization for such person and its Consolidated
Subsidiaries, as determined in accordance with GAAP.
"Consolidated EBITDA" means, with respect to any person, for any
period, the Consolidated Net Income of such person for such period adjusted to
add thereto (to the extent deducted from net revenues in determining
Consolidated Net Income), without duplication, the sum of (i) Consolidated
Income Tax expense, (ii) Consolidated Depreciation and Amortization expense and
(iii) Adjusted Consolidated Fixed Charges.
"Consolidated Fixed Charges" of any person means, for any period, the
aggregate amount (without duplication) of (a) interest expensed or capitalized,
paid, accrued, or scheduled to be paid or accrued in accordance with GAAP
(including, in accordance with the following sentence, interest attributable to
Capitalized Lease Obligations) during such period in respect of all Indebtedness
of such person and its Consolidated Subsidiaries, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness other
than with respect to the Securities, (ii) the interest portion of all deferred
payment obligations, calculated in accordance with GAAP, (iii) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptance
financings and currency and Interest Swap Obligations, in each case to the
extent attributable to such period and determined on a consolidated basis in
accordance with GAAP, (b) the rental expense for such period attributable to
operating leases of such person and its Consolidated Subsidiaries, and (c) the
amount of dividends payable by such person or any of its Consolidated
Subsidiaries in respect of Disqualified Capital Stock (other than by
Subsidiaries of such person to such person or such person's wholly owned
Subsidiaries). For purposes of this definition, (x) interest on a Capitalized
Lease Obligation shall be deemed to accrue at an interest rate reasonably
determined by the Company to be the rate
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of interest implicit in such Capitalized Lease Obligation in accordance with
GAAP and (y) interest expense attributable to any Indebtedness represented by
the guaranty by such person or a Subsidiary of such person of an obligation of
another person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"Consolidated Income Tax Expense" for any person means the total net
income tax expenses for such person and its Consolidated Subsidiaries, as
determined in accordance with GAAP.
"Consolidated Net Income" means, with respect to any person for any
period, the net income (or loss) of such person and its Consolidated
Subsidiaries (other than CDGC and its Subsidiaries), determined in accordance
with GAAP, for such period, adjusted to exclude (only to the extent included in
computing such net income (or loss) and without duplication): (a) all gains
which are either extraordinary (as determined in accordance with GAAP) or are
either unusual or nonrecurring (including, without limitation, from the sale of
assets outside the ordinary course of business or from the issuance or sale of
Capital Stock), (b) the net income, if positive, of any person, other than a
Consolidated Subsidiary, in which such person or any of its Consolidated
Subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in Cash to such person or a
Consolidated Subsidiary of such person during such period, but not in excess of
such person's pro rata share of such person's net income for such period, (c)
the net income, if positive, of any person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition and (d) the net
income, if positive, of any of such person's Consolidated Subsidiaries to the
extent that the declaration or payment of dividends or similar distributions is
not at the time permitted by operation of the terms of its charter or bylaws or
any other agreement, instrument, judgment, decree, order, law, statute, rule or
governmental regulation applicable to such Consolidated Subsidiary.
"Consolidated Net Worth" of a person means the aggregate of capital,
surplus and retained earnings of such person (plus amounts of equity
attributable to preferred stock) and its Consolidated Subsidiaries (other than
in the case of the Company, CDGC and its Subsidiaries), as would be shown on the
consolidated balance sheet of such person prepared in accordance with GAAP,
adjusted to exclude (to the extent included in calculating such equity), (a) the
amount of capital, surplus and accrued but unpaid dividends attributable to any
Disqualified Capital Stock, (b) all upward revaluations and other write-ups in
the book value of any asset of such person or a Consolidated Subsidiary of such
person subsequent to the Issue Date, (c) all
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investments in persons that are not Consolidated Subsidiaries and (d) all
Amended Original Guaranty Obligations.
"Consolidated Subsidiary" means, for any person, each Subsidiary of
such person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated for
financial statement reporting purposes with the financial statements of such
person in accordance with GAAP.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Budget" shall have the meaning specified in Section
5.20(a).
"Designated Director" means any Person designated by the Noteholders
Steering Committee (as defined in the Plan) as a member of the Board of
Directors.
"Developmental Expenses" means all expenses (other than overhead
expenses) incurred by the Company and its Subsidiaries in connection with a New
Project other than: (i) expenses incurred in connection with an Authorized
Transaction or an Additional Transaction and (ii) expenses incurred in
connection with the CDGC Project.
"Disqualified Capital Stock" means (a) except as provided in (b), with
respect to any person, Capital Stock of such person (including any Subsidiary of
the Company), that, by its terms or by the terms of any security into which it
is convertible, exercisable or exchangeable, is, or upon the happening of an
event or the passage of time would be, required to be redeemed or repurchased
(including at the option of the holder thereof) by such person or any of its
Subsidiaries, in whole or in part, on or prior to the Stated Maturity of the
Securities and (b) with respect to any Subsidiary of such person (including any
Subsidiary of the Company), any Capital Stock (other than any common stock with
no special rights and no preference, privilege or redemption or repayment
provisions).
"Event of Default" shall have the meaning specified in Section 6.1.
"Event of Loss" means, with respect to any Property or asset, any (i)
loss, destruction or damage of such Property or asset, or (ii) any actual
condemnation, seizure or taking, by
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exercise of the power of eminent domain or otherwise, of such Property or asset,
or confiscation or requisition of the use of such Property or asset.
"Event of Loss Amount" shall have the meaning specified in Section
5.20(d).
"Excess Cash" shall have the meaning specified in Section 5.20(b).
"Excess Cash Collateral Account" shall have the meaning specified in
Section 4.9(a).
"GAAP" means United States generally accepted accounting principles as
in effect on the Issue Date.
"Gaming Authority" means any Governmental Authority with the power to
regulate gaming in any Gaming Jurisdiction, and the corresponding Governmental
Authorities with responsibility to interpret and enforce the laws and
regulations application to gaming in any Gaming Jurisdiction.
"Gaming Jurisdiction" means any Federal, state, tribal or sovereign
nation in which any entity in which the Debtor or Reorganized Debtor has a
direct or indirect beneficial, legal or voting interest, conducts or intends to
conduct, manage, finance, consult with respect to, operate or develop riverboat,
dockside, land-based or any other type of gaming (including, without limitation,
the rendering of services in respect thereof pursuant to a Native American
Casino Management Contract (as such term is defined in the Original Indenture)
or otherwise)
"Gaming Law" means any law, rule, regulation or ordinance governing
gaming activities, including the Indian Gaming Regulatory Act, 25 U.S.C. ss.
2701 et seq., any administrative rules or regulations promulgated thereunder,
and any of the corresponding statutes, rules and regulations in each Gaming
Jurisdiction.
"Gaming Licenses" means any material license, certification, franchise
or other authorization or approval to own, lease, operate or otherwise conduct,
manage, finance, consult with respect to, operate or develop riverboat,
dockside, land-based or any other type of gaming in any Gaming Jurisdiction, and
applicable liquor licenses.
"Governmental Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States or a tribal or foreign government, any sovereign nation where
the Company or any Subsidiary of the Company conducts business (including the
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rendering of management services in respect thereof pursuant to a Native
American Casino Management Contract or otherwise), any state, province or any
city or other political subdivision or otherwise and whether now or hereafter in
existence, or any officer or official thereof, and any maritime authority.
"Guarantor" means each Subsidiary of the Company (other than CDGC and
its Subsidiaries), whether now or hereafter existing.
"Guaranty" shall have the meaning specified in Section 13.2.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"incur" shall have the meaning specified in Section 5.11.
"Incurrence Date" shall have the meaning specified in Section 5.11.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any Property or services,
except such as would constitute accounts payable or other obligations to trade
creditors arising in the ordinary course of business and are not more than
thirty (30) days past their respective original due dates unless such payable is
being contested in good faith and for which adequate reserves have been
established in accordance with GAAP, (iv) evidenced by bankers' acceptances or
similar instruments issued or accepted by banks, (v) for the payment of money
relating to a Capitalized Lease Obligation, or (vi) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all net obligations of such person under Interest Swap
Obligations and foreign currency hedges; (c) all liabilities of others of the
kind described in the preceding clause (a) or (b) that such person has
guaranteed or that is otherwise its legal liability and all obligations to
purchase, redeem or acquire any Capital Stock; (d) all obligations secured by a
Lien to which the Property or assets (including, without limitation, leasehold
interests and any other tangible or intangible property rights) of such person
are subject, whether or not the obligations secured thereby shall have been
assumed by or shall otherwise be
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such person's legal liability, provided, that the amount of such obligations
shall be limited to the lesser of the fair market value of the assets or
Property to which such Lien attaches and the amount of the obligation so
secured; and (e) any and all deferrals, renewals, extensions, refinancings and
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c) or (d), or this clause (e), whether or not between or
among the same parties; provided that obligations in respect of (i) of
Indebtedness (assuming that such obligations were Indebtedness for purposes of
applying this clause (i)) of CDGC and its Subsidiaries, which obligations are
incurred in respect of the CDGC Project, and which obligations, whether pursuant
to the terms thereof or pursuant to applicable law, do not provide for personal
recourse against the Company or any Subsidiary thereof (other than CDGC or its
Subsidiaries), (ii) each Authorized Transaction or Additional Transaction so
long as such obligations are described in the materials submitted to the
Advisory Committee in connection with its approval thereof, (iii) the Amended
Original Guaranty and (iv) Refinancing Indebtedness in respect of the
obligations described in clause (i), (ii) and (iii) and this clause (iv)
(assuming that such obligations were Indebtedness for purposes of applying this
clause (iv)), shall not be deemed Indebtedness for purposes of Section 5.11, the
definitions herein as they apply thereto and any other provision of this
Indenture or the Securities referring, directly or indirectly, to Section 5.11
(or any part thereof) but only in respect of such reference.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Indenture Obligations" means the obligations of the Company and the
Guarantor pursuant to this Indenture and the Securities (and any other obligor
hereunder or under the Securities) now or hereafter existing, to pay principal
of and premium, if any, and interest on the Securities when due and payable,
whether on the Maturity Date or an Interest Payment Date, by acceleration, call
for redemption, acceptance Asset Sale Offer or otherwise, and interest on the
overdue principal and premium, if any, of, and (to the extent lawful) interest,
if any, on, the Securities and all other amounts due or to become due in
connection with this Indenture, the Mortgage and the Securities, including any
and all extensions, renewals or other modifications thereof, in whole or in
part, and the performance of all other obligations of the Company and the
Guarantor (and any other obligor hereunder or under the Securities), including
all costs and expenses incurred by the Trustee or the Holders in the collection
or enforcement of any
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such obligations or realization upon the Collateral or the security of the
Mortgage; provided that Indenture Obligations shall not include Amended Original
Guaranty Obligations.
"Insurance Proceeds" means the Company's and the Guarantor's interest
in and to (a) all proceeds which now or hereafter may be paid under any
insurance policies now or hereafter obtained by or on behalf of the Company or
the Guarantor in connection with the conversion of the Property subject to the
Mortgage into Cash or liquidated claims, together with the interest payable
thereon and the right to collect and receive the same, including, but without
limiting the generality of the foregoing, proceeds of casualty insurance, title
insurance, business interruption insurance and any other insurance now or
hereafter maintained with respect to such Property and (b) all amounts
attributable to Events of Loss. Notwithstanding the foregoing, Insurance
Proceeds shall not include the first $500,000 of proceeds per occurrence
received by the Company or the Guarantor pursuant to any such insurance policy
and the first $500,000 of proceeds paid per Event of Loss, which proceeds (i)
shall be available for use in the operations of the Company or the Guarantor,
provided that such use is determined in good faith, and (ii) shall not be
subject to the provisions of Section 4.4 hereof.
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities (other than in respect of the Amended Original
Guaranty).
"Interest Swap Obligation" means, when used with reference to any
person, the obligations of such person pursuant to any arrangement with any
other person whereby, directly or indirectly, such person is entitled to receive
from time to time periodic payments calculated by applying either a floating or
a fixed rate of interest on a stated notional amount in exchange for periodic
payments made by such person calculated by applying a fixed or a floating rate
of interest on the same notional amount.
"Investment" by any person in any other person means (without
duplication) (a) the acquisition by such person (whether for cash, property,
services, securities or otherwise) of capital stock, bonds, notes, debentures,
partnership or other ownership interests or other securities, including any
options or warrants, of such other person or any agreement to make any such
acquisition; (b) the making by such person of any deposit with, or advance, loan
or other extension of credit to, such other person (including the purchase of
property from another person subject to an understanding or agreement,
contingent or otherwise, to resell such property to such other person) or any
15
<PAGE>
commitment to make any such advance, loan or extension (but excluding accounts
receivable arising in the ordinary course of business); (c) the entering into by
such person of any guarantee of, or other credit support or contingent
obligation with respect to, Indebtedness or other liability of such other
person; or (d) the making of any capital contribution by such person to such
other person. The Company shall be deemed to make an "Investment" in an amount
equal to the fair market value, as reasonably determined by the Board of
Directors of the Company, of the net assets of any Subsidiary of the Company and
any Property transferred to such Subsidiary from the Company, the Guarantor or
any of their respective Subsidiaries shall be deemed an Investment valued at its
fair market value, as reasonably determined by the Board of Directors of the
Company, at the time of such transfer.
"Issue Date" means the date on which the Plan is declared effective.
"Joint Venture" shall have the meaning provided in Section 5.3(b).
"Legal Holiday" shall have the meaning provided in Section 12.7.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest, and
any option or other agreement to give any security interest).
"Maturity Date" when used with respect to any Security, means the date
on which the principal of such Security becomes due and payable as therein or
herein provided, whether at Stated Maturity or by declaration of acceleration,
call for redemption or otherwise.
"Minimum Accumulation Date" shall have the meaning specified in Section
5.14.
"Mortgage" means the Assignment of Rights, the Security Agreement, the
Cash Collateral and Disbursement Agreement and the Pledge Agreement and any
other agreement purporting to convey to the Trustee for the benefit of Holders
of Securities (other than the Amended Original Guaranty), a security interest in
the Property pursuant to the requirements of this Indenture executed by the
Company and the Guarantor in favor of the Trustee for the benefit of such
Securityholders, as the same may be amended from time to time. Any references to
the "Guarantor" or the
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"Securities" in these agreements, shall be deemed to have the same meaning as
set forth in this Indenture.
"Native American Casino" means a Casino which conducts gaming pursuant
to, and in accordance with the Indian Gaming Regulatory Act, 25 U.S.C. ss. 2701
et seq. or any successors thereto, and the rules and regulations promulgated
thereunder by the National Indian Gaming Commission or any successor entity
thereof and with respect to which the Company or any Subsidiary of the Company
has a Native American Casino Management Contract.
"Native American Casino Management Contract" means an active contract
to operate and/or manage one or more Native American Casinos, or any Casino
operated on Native American land; provided that, (i) jurisdiction to rule on
disputes over such contract's terms is properly exercised by a United States
federal or state court, (ii) such contract by its terms is enforceable in a
United States federal or state court and (iii) all necessary Governmental
Authorities with jurisdiction over such matters have approved such contract.
"Net Cash Proceeds" means the aggregate amount of U.S. Legal Tender or
Cash Equivalents received by the Company in the case of a sale of Qualified
Capital Stock, and by the Company and the Guarantor in respect of an Asset Sale,
less, in each case, the sum of all fees, commissions and other expenses incurred
in connection with such sale of Qualified Capital Stock.
"Net Cash Proceeds Account" shall have the meaning as specified in
Section 4.4(a).
"Net Proceeds" means the aggregate Net Cash Proceeds and fair market
value of Property (valued at the fair market value thereof at the time of
receipt in good faith by the Board of Directors of the Company), other than
securities of the Company or the Guarantor in connection with an Asset Sale
pursuant to Section 5.14.
"New Project" means any Project in respect of which no Authorized
Transaction or Additional Transaction has occurred.
"Non-recourse Indebtedness" means Indebtedness of a person to the
extent that under the terms thereof or pursuant to applicable law (i) no
personal recourse shall be had against such person for the payment of the
principal of or interest or premium on such Indebtedness, and (ii) enforcement
of obligations on such Indebtedness is limited only to recourse against
interests in Property and assets purchased with the proceeds of the incurrence
of such Indebtedness and as to which neither the Company nor the Guarantor
provides any credit support and is not liable.
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"Offer to Purchase" means any Asset Sale Offer (including in connection
with an Event of Loss). Any such Offer shall comply with all applicable
provisions of Federal and state laws regulating such offers, and any provisions
of this Indenture which conflict with such laws shall be deemed to be superseded
by the provisions of such laws.
"Offer to Purchase Price" means any Asset Sale Offer Price (including
in connection with an Event of Loss).
"Officer" means, with respect to the Company, the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary or Assistant Secretary of the
Company.
"Officers' Certificate" means a certificate signed by two Officers of
the Company and otherwise complying with the requirements of Sections 14.4 and
14.5.
"Opinion of Counsel" means a written opinion from legal counsel to the
Company complying with the requirements of Sections 14.4 and 14.5. Unless
otherwise required by this Indenture, the counsel may be in-house counsel to the
Company.
"Original Guarantor" means CGMI.
"Original Indenture" shall have the meaning specified in the first
Recital hereto.
"Original Securities" means the 11-1/2% Senior Secured Notes due 2001
of the Company issued under the Original Indenture.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Permitted FF&E Financing" means (i) Non-recourse Indebtedness
incurred to finance the acquisition or lease after the Issue Date of newly
acquired or leased furniture, fixtures or equipment ("FF&E") which is used
directly in the operation of Casinos and which is secured by a Lien on such
FF&E, and (ii) any guarantee by the Company or any of its Subsidiaries of
Indebtedness of any Native American Tribe for so long as a Native American
Casino Management Contract with respect to such Native American Tribe shall be
in effect; provided, that, in the case of clause (ii) of this definition, such
Indebtedness is incurred to finance the acquisition or lease after the Issue
Date of FF&E directly used or to be directly used, in a Native American Casino,
which Indebtedness is secured by a Lien on such FF&E. The Lien described in this
definition may be exclusive of any
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Lien on such FF&E purported to be created hereunder or under the Mortgage.
"Permitted Indebtedness" means any of the following:
(a) The Company and any of its Subsidiaries may incur Indebtedness
solely in respect of bankers acceptances, letters of credit and performance
bonds (to the extent that such incurrence does not result in the incurrence of
any obligation for the payment of borrowed money of any person other than the
Company or any of its Subsidiaries), all in the ordinary course of business, in
amounts and for the purposes customary in the Company's or such Subsidiary's
industry for gaming operations similar to those of the Company or such
Subsidiary, provided, that the aggregate principal amount outstanding of such
Indebtedness (including any Indebtedness issued to refinance, refund or replace
such Indebtedness) shall at no time exceed $1.5 million;
(b) The Company may incur Indebtedness to a Subsidiary of the Company,
and a Subsidiary of the Company may incur Indebtedness to any other Subsidiary
of the Company or to the Company.
(c) The Company and any Subsidiary of the Company may incur
Indebtedness representing the balance deferred and unpaid of the purchase price
of any property or services used in the ordinary course of their business that
would constitute ordinarily a trade payable to trade creditors (other than
accounts payable or other obligations to trade creditors arising in the ordinary
course of business which have remained unpaid for greater than 30 days from
their respective original due dates unless such payable is being contested in
good faith and for which adequate reserves have been established in accordance
with GAAP); and
(d) The Company and any Subsidiary of the Company may post a bond or
surety obligation (or incur an indemnity or similar obligation) in order to
prevent the impairment or loss of or to obtain a Gaming License, to the extent
required by applicable law and consistent in character and amount with customary
industry practice.
"Permitted Liens" means any of the following:
(a) Liens for taxes, assessments or other governmental charges not yet
due or which are being contested in good faith and by appropriate proceedings by
the Company or any of its Subsidiaries if adequate reserves with respect thereto
are
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maintained on the books of the Company or such Subsidiary in accordance with
GAAP;
(b) statutory Liens of carriers, warehousemen, mechanics, landlords,
materialmen, repairmen or other like Liens arising by operation of law in the
ordinary course of business and consistent with industry practices and Liens on
deposits made to obtain the release of such Liens if (i) the underlying
obligations are not overdue for a period of more than sixty (60) days or (ii)
such Liens are being contested in good faith and by appropriate proceedings by
the Company or any of its Subsidiaries and adequate reserves with respect
thereto are maintained on the books of the Company or such Subsidiary in
accordance with GAAP;
(c) easements, rights-of-way, zoning and similar restrictions and other
similar encumbrances or title defects incurred or imposed, as applicable, in the
ordinary course of business and consistent with industry practices which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto (as such
property is used by the Company or any of its Subsidiaries) or interfere with
the ordinary conduct of the business of the Company or such Subsidiary;
provided, that any such Liens are not incurred in connection with any borrowing
of money or any commitment to loan any money or to extend any credit;
(d) Liens existing on the Issue Date;
(e) Liens created by the Indenture and the Mortgage; and
(f) Liens that secure Acquired Indebtedness or Liens on acquired
assets, provided, in each case, that such Liens do not secure any other property
or assets and were not put in place in connection with or in anticipation of
such acquisition, merger or consolidation.
"Permitted Regulatory Redemption" means a redemption by the Company or
any of its Subsidiaries of such person's securities pursuant to, and in
accordance with, any order of any Governmental Authority with appropriate
jurisdiction and authority relating to a Gaming License, or to the extent
necessary in the reasonable, good faith judgment of the Board of Directors of
the Company to prevent the loss, failure to obtain or material impairment or to
secure the reinstatement of, any material Gaming License, where in any such case
such redemption or acquisition is required because the holder or beneficial
owner of such security is required to be found suitable or to otherwise
20
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qualify under any Gaming Laws and is not found suitable or so qualified within a
reasonable period of time.
"person" means any individual, limited liability company, corporation,
partnership, joint venture, association, joint-venture company, Native American
Tribe, trust, unincorporated organization or government or other agency or
political subdivision thereof.
"Plan" means the Company's Plan of Reorganization, dated December 22,
1996, as amended, filed in the Bankruptcy Court and confirmed on March 19, 1997.
"Pledge Agreement" means the Pledge Agreement, dated February 17,
1994, from the Company and CGMI, as Pledgor, to the Trustee for the benefit of
Holders (other than in respect of the Amended Original Guaranty), as the same
may be amended from time to time in accordance with the terms thereof.
"principal" of any Indebtedness (including the Securities) means the
principal of such Indebtedness plus any applicable premium, if any, on such
Indebtedness.
"Project" means any project to build, construct, develop, refurbish or
expand any Casino, whether owned or operated by the Company, a Native American
Tribe or band or any other person.
"Projected Expenditures" shall have the meaning specified in Section
5.20(a).
"Property" or "property" means any right or interest in or to property
or assets of any kind whatsoever, whether real, personal or mixed and whether
tangible, intangible, contingent, indirect or direct.
"Proposed Budget" shall have the meaning specified in Section 5.20(a).
"Qualified Capital Stock" means any Capital Stock of the Company that
is not Disqualified Capital Stock.
"Qualified Exchange" means any defeasance, redemption, repurchase or
other acquisition of Capital Stock or Subordinated Indebtedness of the Company
to the extent funded with the Net Proceeds received by the Company from the
substantially concurrent sale of Qualified Capital Stock or to the extent
effected in exchange for Qualified Capital Stock.
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"Qualified Restricted Investment" means any Restricted Investment to
the extent funded with the Net Proceeds received by the Company from the
substantially concurrent sale of Qualified Capital Stock or to the extent
effected in exchange for Qualified Capital Stock.
"Record Date" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day.
"Redemption Date" when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and, in the case of Securities (other than the Amended Original
Guaranty), Paragraph 5 in the form of Security.
"Redemption Price" when used with respect to any Security to be
redeemed, means the redemption price for such redemption set forth in Paragraph
5 in the form of Security, which shall include in each case accrued and unpaid
interest with respect to such Security to the applicable Redemption Date.
"Reference Period" with regard to any person means the four full fiscal
quarters (or (i) such lesser period during which such person has been in
existence or (ii) in the case of the Company and its Subsidiaries, such lesser
period commencing with the beginning of the first full final quarter commencing
on, or immediately after, the Issue Date) ended immediately preceding any date
upon which any determination is to be made pursuant to the terms of the
Securities or the Indenture; provided, that if the applicable Reference Period
is less than four fiscal quarters, the Adjusted Consolidated Fixed Charges of
such person, shall be computed on an annualized basis.
"Refinancing Indebtedness" means Indebtedness or Disqualified Capital
Stock (a) issued in exchange for, or the proceeds from the issuance and sale of
which are used substantially concurrently to repay, redeem, defease, refund,
refinance, discharge or otherwise retire for value, in whole or in part, or (b)
constituting an amendment, modification or supplement to, or a deferral or
renewal of ((a) and (b) above are, collectively, a "Refinancing"), any
Indebtedness or Disqualified Capital Stock in a principal amount or, in the case
of Disqualified Capital Stock, a liquidation preference, not to exceed (after
deduction of reasonable and customary fees and expenses incurred in connection
with the Refinancing) the lesser of (i) the principal amount or, in the case of
Disqualified Capital Stock, liquidation preference, of the Indebtedness or
Disqualified Capital Stock so Refinanced and (ii) if such Indebtedness being
Refinanced was issued with an original issue discount, the accreted value
thereof (as determined in accordance
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with GAAP) at the time of such Refinancing; provided, that (A) Refinancing
Indebtedness of a Guarantor shall only be used to refinance outstanding
Indebtedness or Disqualified Capital Stock of such Guarantor, (B) Refinancing
Indebtedness shall (x) not have an Average Life shorter than the Indebtedness or
Disqualified Capital Stock to be so refinanced at the time of such refinancing
and (y) in all respects, be no less subordinated, if applicable, to the rights
of Holders pursuant to the Securities (other than in respect of the Amended
Original Guaranty) than was the Indebtedness or Disqualified Capital Stock to be
refinanced and (C) such Refinancing Indebtedness shall have no installment of
principal (or redemption) scheduled to come due earlier than the scheduled
maturity of any installment of principal of the Indebtedness or Disqualified
Capital Stock to be so refinanced which was scheduled to come due prior to the
Stated Maturity.
"Registrar" shall have the meaning specified in Section 2.3.
"Related Business" means (a) the gaming business conducted (or proposed
to be conducted) by the Company and its Subsidiaries as of the Issue Date and
(b) any and all businesses materially related to the gaming business whether or
not such gaming business is conducted by the Company or its Subsidiaries.
"Required Regulatory Redemption" means a redemption by the Company or
any Subsidiary of the Company of any of such Holder's Securities pursuant to,
and in accordance with, any order of any Governmental Authority with appropriate
jurisdiction and authority relating to a Gaming License, or to the extent
necessary in the reasonable, good faith judgment of the Board of Directors of
the Company to prevent the loss, failure to obtain or material impairment, or to
secure the reinstatement, of any material Gaming License, where in any such case
such redemption or acquisition is required because such Holder or beneficial
owner of such Security is required to be found suitable or to otherwise qualify
under any Gaming Laws and is not found suitable or so qualified within a
reasonable period of time.
"Restricted Investment" means, in one or a series of related
transactions, any Investment other than in Cash Equivalents and the extension of
guarantees described in clause (ii) of the definition of Permitted FF&E
Financing; provided, that (a) the extension of credit to customers of Casinos
consistent with industry practice and in the ordinary course of business shall
not be a Restricted Investment, and (b) Investments in respect of Authorized
Transactions or Additional Transactions, shall not be a Restricted Investment.
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<PAGE>
"Restricted Payment" means, with respect to any person, (a) the
declaration or payment of any dividend or other distribution in respect of
Capital Stock of such person or any Subsidiary of such person, (b) any payment
on account of the purchase, redemption or other acquisition or retirement for
value of Capital Stock of such person or any Subsidiary of such person (other
than such payments by a person to acquire Capital Stock of a Subsidiary of such
person), (c) any purchase, redemption, or other acquisition or retirement for
value of, or any defeasance of, any Subordinated Indebtedness, directly or
indirectly, by such person or a Subsidiary of such person (other than any
purchase, redemption or other acquisition or retirement for value by or any
defeasance by a person of any Subordinated Indebtedness of a Subsidiary of such
person) prior to the scheduled maturity, any scheduled repayment of principal,
or scheduled sinking fund payment, as the case may be, of such Indebtedness
(including any payment in respect of any amendment of the terms of any such
Subordinated Indebtedness, which amendment is sought in connection with any such
acquisition of such Indebtedness or seeks to shorten any such due date), and (d)
any Restricted Investment of such person; provided, however, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on or with respect to Capital Stock of an issuer to the extent payable
solely in shares of Qualified Capital Stock of such issuer; (ii) any dividend,
distribution or other payment to the Company, or to any of its directly or
indirectly wholly owned Subsidiaries (other than CDGC and its Subsidiaries), by
any of its Subsidiaries; (iii) Investments in the Company or any of its directly
or indirectly wholly owned Subsidiaries (other than CDGC and its Subsidiaries),
all of whose capital stock has been pledged as Collateral for the Securities
(other than the Amended Original Guaranty) in favor of the Holders thereof; and
(iv) any dividend, distribution or other payment in respect of Capital Stock
issued or sold, or Indebtedness incurred, in respect of an Authorized
Transaction or Additional Transaction which issuance or sale is described in the
materials submitted to the Advisory Committee in connection with its approval
thereof.
"SEC" means the Securities and Exchange Commission.
"Security" or "Securities" means the 12.0% Senior Secured Notes due
2001 of the Company, as amended or modified from time to time in accordance with
the terms hereof, issued under this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
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<PAGE>
"Security Agreement" means the Security Agreement, dated February 17,
1994, by and between the Company, the Guarantor and the Trustee for the benefit
of the Holders (other than in respect of the Amended Original Guaranty), as the
same may be amended from time to time in accordance with the terms thereof.
"Securityholder" See "Holder."
"Stated Maturity" means, when used with respect to any Security, the
fourth anniversary of the Issue Date.
"Subordinated Indebtedness" means Indebtedness of the Company that is
subordinated in right of payment to the Securities (other than the Amended
Original Guaranty) in any respect or has a stated maturity on or after the
Stated Maturity.
"Subsidiary", with respect to any person, means (i) a corporation a
majority of whose Capital Stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such person,
by such person and one or more Subsidiaries of such person or by one or more
Subsidiaries of such person or (ii) any other person (other than a corporation)
in which such person, one or more Subsidiaries of such person, or such person
and one or more Subsidiaries of such person, directly or indirectly, at the date
of determination thereof has at least majority ownership interest.
"Termination Date" means the date on which persons identified as
Designated Directors, which persons, serving as members of the Board of
Directors of the Company, would constitute at least a majority of the members
thereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-7bbbb) as in effect on the date of the execution of this Indenture.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Trust Officer" means any officer within the corporate trust department
(or any successor group) of the Trustee including any vice president, assistant
vice president, secretary, assistant secretary or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust officer, any other officer
of the corporate trust
25
<PAGE>
department (or any successor group) of the Trustee to whom such trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
"U.S. Government Obligations" means direct non-callable obligations of,
or non-callable obligations guaranteed by, the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts.
"wholly owned" with respect to a Subsidiary of any person means (i)
with respect to a Subsidiary that is a limited liability company or similar
entity, a Subsidiary whose capital stock is 99% or greater beneficially owned by
such person and (ii) with respect to a Subsidiary that is other than a limited
liability company or similar entity, a Subsidiary whose capital stock or other
equity interest is 100% beneficially owned by such person.
Section 1.2. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
Section 13.3. Rules of Construction.
---------------------
26
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Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in
the plural include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(vii) references to Sections or Articles means reference to
such Section or Article in this Indenture, unless stated otherwise.
ARTICLE XIV.
THE SECURITIES
Section 14.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication, in
respect thereof, shall be substantially in the form of Exhibit A hereto, each of
which is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the form of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby; provided that none of the Company or any of its Subsidiaries (other
than the Original Guarantor) shall be bound by or have any liability in respect
of, Amended Original Guaranty Obligations.
27
<PAGE>
Section 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted, or
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security, but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the term of this Indenture. The Trustee shall
authenticate Securities for original issue in the aggregate principal amount of
up to $23,100,000 upon a written order of the Company in the form of an
Officers' Certificate. The Officers' Certificate shall specify the amount of
Securities to be authenticated and the date on which the Securities are to be
authenticated. The aggregate principal amount of Securities (other than in
respect of the Amended Original Guaranty) outstanding at any time may not exceed
$23,100,000, except as provided in Section 2.7. The aggregate principal amount
of the Amended Original Guaranty outstanding at any time shall not exceed
$103,200,000, except as provided in Section 2.7. Upon the written order of the
Company in the form of an Officers' Certificate, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons in
denominations of $100 and any integral multiple thereof.
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Section 2.3. Registrar and Paying Agent.
--------------------------
The Company and, in respect of the Amended Original Guaranty, the
Original Guarantor, shall maintain an office or agency in St. Paul, Minnesota,
where Securities may be presented for registration of transfer or for exchange
("Registrar") and an office or agency in St. Paul, Minnesota where Securities
may be presented for payment ("Paying Agent") and an office or agency where
notices and demands to or upon the Company or the Original Guarantor, as the
case may be, in respect of the Securities may be served. The Company may act as
its own Registrar or Paying Agent (including in respect of the Amended Original
Guaranty), except that, for the purposes of Articles III and VII, neither the
Company nor any Affiliate of the Company shall act as Paying Agent. The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. Each of the Company and the Original Guarantor hereby initially appoints
the Trustee as Registrar and Paying Agent, and the Trustee hereby initially
agrees so to act.
The Company and, in respect of the Amended Original Guaranty, the
Original Guarantor, shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company and, in respect of the Amended Original Guaranty, the
Original Guarantor, fail to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
Section 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company and, in respect of the Amended Original Guaranty, the
Original Guarantor, shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Securities (whether such assets have been
distributed to it by the Company or any other obligor on the Securities), and
shall notify the Trustee in writing of any Default by the Company (or any other
obligor on the Securities) in making any such payment. If the Company or a
Subsidiary of the Company acts as Paying Agent, it shall segregate such assets
and hold them as a separate trust fund for the benefit of the Holders of the
Securities (other than in respect of the Amended Original Guaranty), the Holders
of the Amended Original Guaranty or the Trustee, as the case may be. The Company
at any time may require a Paying Agent to distribute all assets held by it to
the Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
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Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company (or in the
case of the Amended Original Guaranty, the Original Guarantor) to the Paying
Agent, the Paying Agent (if other than the Company or the Original Guarantor)
shall have no further liability for such assets.
Section 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders. The Trustee, the Registrar and the Company shall provide a
current securityholder list to any Gaming Authority upon demand.
Section 2.6. Transfer and Exchange.
---------------------
When Securities are presented to the Registrar or a co-Registrar with a
request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of other authorized
denominations, the Registrar or co-Registrar shall register the transfer or make
the exchange as requested if its reasonable requirements for such transaction
are met; provided, however, that the Securities surrendered for transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar or
co-Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing. To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Securities at the
Registrar's or co-Registrar's request. No service charge shall be made for any
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any transfer tax, assessments, or similar governmental
charge payable in connection therewith (other than any such transfer taxes,
assessments, or similar governmental charge payable upon exchanges or transfers
pursuant to Sections 2.2, 2.10, 3.9, 5.14, 10.5 or 12.1). Except for a Required
Regulatory Redemption pursuant to Section 3.2 of this Indenture or an order of
any Gaming Authority, the Registrar or co-Registrar shall not be required to
register the transfer of or
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exchange of (a) any Security selected for redemption in whole or in part
pursuant to Article III hereof, except the unredeemed portion of any Security
being redeemed in part, or (b) any Security for a period beginning 15 Business
Days before the mailing of a notice of an offer to repurchase pursuant to
Sections 5.14 or redeem Securities pursuant to Article III hereof and ending at
the close of business on the day of such mailing.
Section 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Security for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
Section 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee except those canceled by it, those delivered
to it for cancellation and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of the Company) holds U.S. Legal Tender or U.S.
Government Obligations sufficient to pay all of the principal and interest due
on the Securities payable on that date and payment of the Securities called for
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redemption is not otherwise prohibited, then on and after that date such
Securities cease to be outstanding and interest on them ceases to accrue.
Section 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company, the Guarantor and Affiliates of the
Company or of the Guarantor shall be disregarded, except that, for the purposes
of determining whether the Trustee shall be protected in relying on any such
direction, amendment, supplement, waiver or consent, only Securities that the
Trustee knows or has reason to know are so owned shall be disregarded.
Section 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare, the Guarantor shall endorse and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company reasonably and in
good faith considers appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare, the Guarantor shall endorse and the Trustee
shall authenticate definitive Securities in exchange for temporary Securities.
Until so exchanged, the temporary Securities shall in all respects be entitled
to the same benefits under this Indenture as permanent Securities authenticated
and delivered hereunder.
Section 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel and, in accordance with normal operating procedures, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation. Subject
to Section 2.7, the Company may not issue new Securities to replace Securities
it has paid or delivered to the Trustee for cancellation. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section 2.11, except as expressly permitted in the form of Securities
and as permitted in this Indenture.
Section 2.12. Defaulted Interest.
------------------
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If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) interest on the
defaulted interest, to the persons who are Holders on a Record Date (or at its
option a subsequent special record date) which date shall be the fifteenth day
next preceding the date fixed by the Company for the payment of defaulted
interest, whether or not such day is a Business Day, unless the Trustee fixes
another record date. At least 15 days before the subsequent special record date,
the Company shall mail to each Holder with a copy to the Trustee a notice that
states the subsequent special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
ARTICLE III.
REDEMPTION
Section 3.1. Right of Redemption.
-------------------
Redemption of Securities shall be made only in accordance with this
Article III. At its election, the Company may redeem the Securities (other than
the Amended Original Guaranty forming a part thereof) in whole or in part, at
any time on or after the Issue Date at the Redemption Price of 100% of principal
amount, including accrued and unpaid interest to the Redemption Date (other than
Amended Original Guaranty Obligations). At its election, the Original Guarantor
may redeem the Amended Original Guaranty, in whole or in part, at any time on or
after the Issue Date at the Redemption Price of 100% of the principal amount,
including accrued and unpaid interest to the Redemption Date. Except as provided
in this paragraph, Section 3.3 and paragraph 5 of the Securities, the Securities
may not otherwise be redeemed at the option of the Company.
Section 3.2. Mandatory Sinking Fund; Payments and Credits.
--------------------------------------------
The Securities (but not the Amended Original Guaranty) are subject to
redemption on each of the third anniversary and the fourth anniversary of the
Issue Date through the operation of the mandatory sinking fund provided by this
Section 3.2. The Company shall make a mandatory sinking fund payment on each of
the redemption dates set forth below in an amount sufficient to retire by
redemption on each such mandatory redemption date Securities (other than the
Amended Original Guaranty) having an aggregate principal amount equal to the
principal amount set forth below, at a mandatory sinking fund redemption price
of 100% of the principal amount thereof together with accrued interest to the
redemption date:
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Redemption Date Principal Amount
--------------- ----------------
Third Anniversary of the Issue Date $ 4,620,000
Fourth Anniversary of the Issue Date $ 18,480,000
All sinking fund payments shall be made by depositing immediately
available funds sufficient therefor with the Trustee no later than 10:00 A.M.,
New York City time, on or prior to the respective redemption date. The sinking
fund redemption shall be made by the Trustee in the manner set forth in Section
3.6 hereof and notice shall be given by the Company in the manner set forth in
Section 3.4 hereof.
Section 3.3. Redemption Pursuant to Gaming Laws.
----------------------------------
Notwithstanding any other provision of this Indenture, the Securities
shall also be redeemable at any time pursuant to, and in accordance with, a
Required Regulatory Redemption. If the Company requires the redemption of any
Security pursuant to this Section 3.3, then the redemption price shall be the
principal amount thereof, plus accrued interest to the date of redemption. The
Company or, in the case of the Amended Original Guaranty, the Original
Guarantor, shall tender the redemption price (together with any accrued and
unpaid interest) to the Trustee no later than 30 and no more than 60 days after
the Company gives the Securityholder or owner of a beneficial or voting interest
written notice of redemption or such earlier date as may be ordered by any
Gaming Authority. The Company or, in the case of the Amended Original Guaranty,
the Original Guarantor, shall notify the Trustee of any disposition or
redemption required under this Section 3.3, and upon receipt of such notice, the
Trustee shall not accord any rights or privileges under this Indenture or any
Security to any Securityholder or owner of a beneficial or voting interest who
is required to dispose of any Security or tender it for redemption, except to
pay the redemption price (together with any accrued but unpaid interest) upon
tender of such Security.
Section 3.4. Notices to Trustee.
------------------
If the Company or, in the case of the Amended Original Guaranty, the
Original Guarantor, elects to redeem Securities pursuant to Article III, it
shall notify the Trustee in writing of the date on which the Securities are to
be redeemed ("Redemption Date") and the principal amount of Securities to be
redeemed and whether it wants the Trustee to give notice of redemption to the
Holders.
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<PAGE>
If the Company or, in the case of the Amended Original Guaranty, the
Original Guarantor, elects to reduce the principal amount of Securities to be
redeemed pursuant to Paragraph 5 of the Securities by crediting against any such
redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice.
The Company or, in the case of the Amended Original Guaranty, the
Original Guarantor, shall give each notice to the Trustee provided for in this
Section 3.4 at least 45 days before the Redemption Date (unless a shorter notice
shall be required by applicable Gaming Laws or by order of any Gaming
Authority).
Section 3.5. Selection of Securities to Be Redeemed
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof or, in the case of the Amended Original Guaranty, otherwise,
the Trustee shall select from among such Securities to be redeemed pro rata or
by lot or by such other method as the Trustee shall determine to be fair and
appropriate and in such manner as complies with any applicable legal and stock
exchange requirements.
The Trustee shall make the selection from the Securities outstanding
and not previously called for redemption and shall promptly notify the Company
or, in the case of the Amended Original Guaranty, the Original Guarantor, in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. Securities in denominations of $100 may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $100 or any integral
multiple thereof) of the principal of Securities that have denominations larger
than $100. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption.
Section 3.6. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date,
the Company or, in the case of the Amended Original Guaranty, the Original
Guarantor, shall mail a notice of redemption by first-class mail, postage
prepaid, to each Holder whose Securities are to be redeemed (unless a shorter
notice shall be required by applicable Gaming Laws). At the Company's or, in the
case of the Amended Original Guaranty, the Original Guarantor's, request, the
Trustee shall give the notice of redemption in the Company's name and at the
Company's or, in the case of the Amended Original Guaranty, the Original
Guarantor's,
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<PAGE>
expense. Each notice for redemption shall identify the Securities to be redeemed
and shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and unpaid
interest to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
(4) that the Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect the
Redemption Price;
(5) that, unless (a) the Company or, in the case of the Amended
Original Guaranty, the Original Guarantor, defaults in its obligation to
deposit U.S. Legal Tender with the Paying Agent in accordance with Section
3.8 hereof or (b) such redemption payment is prevented for any reason,
interest on Securities called for redemption ceases to accrue on and after
the Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the Redemption Price, including accrued
and unpaid interest, upon surrender to the Paying Agent of the Securities
called for redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple thereof, of such
Security to be redeemed and that, after the Redemption Date, and upon
surrender of such Security, a new Security or Securities in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of such Securities to
be redeemed and the aggregate principal amount of Securities to be
outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.5 and, if
applicable, pursuant to the redemption provisions of Paragraph 5 of the
Securities; and
(10) that such redemption is in respect of the Amended Original
Guaranty, if that is the case.
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<PAGE>
Section 3.7. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.6,
Securities (other than in respect of the Amended Original Guaranty) called for
redemption become due and payable on the Redemption Date and at the Redemption
Price, including accrued and unpaid interest. Upon surrender to the Trustee or
Paying Agent, Securities called for redemption shall be paid at the applicable
Redemption Price, including any interest accrued to and unpaid on the Redemption
Date; provided, that in the case of Securities (other than in respect of the
Amended Original Guaranty), if the Redemption Date is after a regular Record
Date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Holder of such redeemed Securities registered on the relevant
Record Date; and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.8. Deposit of Redemption Price.
---------------------------
On or before the Redemption Date, the Company or, in the case of the
Amended Original Guaranty, the Original Guarantor, shall deposit with the Paying
Agent (other than the Company or an Affiliate of the Company) U.S. Legal Tender
sufficient to pay the applicable Redemption Price of, including accrued and
unpaid interest on, all Securities to be redeemed on that date (other than
Securities or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation). The Paying Agent
shall promptly return to the Company or, in the case of the Amended Original
Guaranty, the Original Guarantor, any U.S. Legal Tender so deposited which is
not required for that purpose upon the written request of the Company or, in the
case of the Amended Original Guaranty, the Original Guarantor.
If the Company or, in the case of the Amended Original Guaranty, the
Original Guarantor, complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not prevented for any reason, interest on the Securities to be
redeemed will cease to accrue on the applicable Redemption Date, whether or not
such Securities are presented for payment. Notwithstanding anything herein to
the contrary, if any Security surrendered for redemption in the manner provided
in the Securities shall not be so paid upon surrender for redemption because of
the failure of the Company or, in the case of the Amended Original Guaranty, the
Original Guarantor, to comply with the preceding paragraph and the other
provisions of this Article III, interest shall continue
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to accrue and be paid from the Redemption Date until such payment is made on the
unpaid principal, and, to the extent lawful, on any interest not paid on such
unpaid principal, in each case at the rate and in the manner provided in Section
5.1 hereof and the Securities.
Section 3.9. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is redeemed in part, the Company
shall execute and the Trustee shall authenticate and deliver to the Holder,
without service charge, a new Security or Securities equal in principal amount
to the unredeemed portion of the Security surrendered.
ARTICLE IV.
SECURITY
Section 4.1. Security Interest.
-----------------
(a) In order to secure the prompt and complete payment and performance
in full of Indenture Obligations, the Company, each Guarantor and the Trustee
have entered into this Indenture and the Mortgage. Each Holder, by accepting a
Security, agrees to all of the terms and provisions of this Indenture and the
Mortgage, and the Trustee agrees to all of the terms and provisions of the
Indenture and the Mortgage as this Indenture and the Mortgage may be amended
from time to time pursuant to the provisions thereof and hereof.
(b) The Collateral as now or hereafter constituted shall be held for
the equal and ratable benefit of the Holders of Securities (other than in
respect of the Amended Original Guaranty), without preference, priority or
distinction of any thereof over any other by reason of difference in time of
issuance, sale or otherwise, as security for the Indenture Obligations.
(c) The provisions of TIA ss. 314(d), and the provisions of TIA ss.
314(c)(3) to the extent applicable by specific reference in this Article IV, are
hereby incorporated by reference herein as if set forth in their entirety and to
the same extent as if the Indenture were qualified under the TIA.
Section 4.2. Recording; Opinions of Counsel.
------------------------------
(a) Each of the Company and each Guarantor represents that it has
caused to be executed and delivered, filed and recorded and covenants that it
will promptly cause to be executed and delivered, filed and recorded, all
instruments and documents, and have done and will do or will cause to be done
all such acts and other things, at the Company's expense, as are necessary to
effect and maintain valid and perfected security interests in the Collateral.
Each of the Company and each Guarantor shall, as promptly as practicable, cause
to be executed and delivered, filed and recorded all instruments and do all acts
and other things as may be required by law to perfect, maintain and protect the
security interests under the Mortgage and herein.
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(b) The Company shall furnish to the Trustee, promptly after the
execution and delivery of this Indenture and the Mortgage and promptly after the
execution and delivery of any amendment thereto or any other instrument of
further assurance, an Opinion(s) of Counsel stating that, in the opinion of such
counsel, subject to customary exclusions and exceptions reasonably acceptable to
the Trustee, either (i) this Indenture, the Mortgage, any such amendment and all
other instruments of further assurance have been properly recorded, registered
and filed and all such other action has been taken to the extent necessary to
make effective valid security interests and to perfect the security interests
intended to be created by the Indenture and the Mortgage, and reciting the
details of such action, or (ii) no such action is necessary to maintain the
validity and perfection of the security interests under the Mortgage and
hereunder.
(c) The Company shall furnish to the Trustee, within 60 days after
February 1 in each year commencing 1998, an Opinion(s) of Counsel, dated as of
such date, stating that, in the opinion of such counsel, subject to customary
exclusions and exceptions, either (A) all such action has been taken with
respect to the recording, registering, filing, rerecording and refiling of the
Indenture, all supplemental indentures, the Mortgage, financing statements,
continuation statements and all other instruments of further assurance as is
necessary to maintain the security interests under the Mortgage and hereunder in
full force and effect and reciting the details of such action, and stating that
all financing statements and continuation statements have been executed and
filed and such other actions taken that are necessary fully to preserve and
protect the rights of the Holders and the Trustee hereunder and under the
Mortgage or (B) no such action is necessary to maintain the security interests
in full force and effect.
Section 4.3. Disposition of the Collateral.
-----------------------------
(a) Each of the Company and each Guarantor may, without consent of the
Trustee, but otherwise subject to the requirements of this Indenture:
(i) sell, assign, transfer, license or otherwise dispose of,
free from the security interests under the Mortgage and hereunder, any
machinery, equipment, or other personal Property constituting
Collateral that has become worn out, obsolete, or unserviceable or is
being upgraded, upon replacing the same with or substituting for the
same, machinery, equipment or other Property constituting Collateral
not necessarily of the same character but being of at least equal fair
value and at least equal utility to the Company as the Property so
disposed of, which Property shall without further action become
Collateral subject to the security interests under the Mortgage and
hereunder;
(ii) (A) sell, assign, transfer, license or otherwise
dispose of, free from the security interests under the Mortgage and
hereunder, inventory held for resale that is at any time part of the
Collateral in the ordinary course of the Company's or such Guarantor's
business, consistent
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with industry practices, (B) collect, liquidate, sell, factor or otherwise
dispose of, free from the security interests under the Mortgage, accounts
receivable or notes receivable that are part of the Collateral in the ordinary
course of the Company's or such Guarantor's business, consistent with industry
practices, or (C) make Cash payments (including scheduled repayments of
Indebtedness permitted to be incurred hereby) from Cash that is at any time part
of the Collateral in the ordinary course of business; provided, however, that,
except for Cash payments made in accordance with the terms of this Indenture (i)
to consummate an Offer to Purchase or (ii) to redeem the Securities pursuant to
either an optional or mandatory redemption in accordance with Article III hereof
and Paragraph 5 or 6 of the form of Security attached hereto as Exhibit A, as
applicable, such Cash payments may not be made from Cash held in the Cash
Collateral Account;
(iii) abandon, sell, assign, transfer, license or otherwise
dispose of any personal Property the use of which is no longer
necessary or desirable in the proper conduct of the business of the
Company and its Subsidiaries and the maintenance of its earnings and
is not material to the conduct of the business of the Company and its
Subsidiaries;
(iv) sell, assign, transfer, license or otherwise dispose
of, free from the security interests under the Mortgage and hereunder
any assets or Property in accordance with Section 5.14; provided that
the proceeds of such sale, assignment, transfer or other disposition
are applied in the manner set forth in Section 5.14 and, provided,
further, that the Net Cash Proceeds from such disposition required to
be applied to an Offer to Purchase or invested in a Related Business
pursuant to Section 5.14 are held in the Net Cash Proceeds Account,
pending such application or investment in accordance with Section 5.14
and, provided, further, that the Trustee shall have a valid and
perfected security interest in all net proceeds that are not Net Cash
Proceeds from such disposition or any assets or property acquired with
the proceeds from such disposition in the same priority as such assets
or Property so disposed of; and
(v) sell, assign, transfer, license or otherwise dispose of,
free from the security interests under the Mortgage and hereunder, any
Property constituting Collateral, provided that such disposition is in
respect of an Authorized Transaction or an Additional Transaction.
40
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(b) In the event that any of the Company or any Guarantor has sold,
exchanged, or otherwise disposed of or proposes to sell, exchange or otherwise
dispose of any portion of the Collateral which under the provisions of this
Section 4.3 may be sold, exchanged or otherwise disposed of by the Company or
such Guarantor without consent of the Trustee, and the Company or such Guarantor
requests the Trustee to furnish a written disclaimer, release or quitclaim of
any interest in such Property under the Mortgage, the Trustee shall execute such
an instrument upon delivery to the Trustee of an Officers' Certificate by the
Company or such Guarantor reciting the sale, exchange or other disposition made
or proposed to be made and describing in reasonable detail the property affected
thereby, and stating and demonstrating that such Property is Property which by
the provisions of this Section 4.3 may be sold, exchanged or otherwise disposed
of or dealt with by the Company or such Guarantor without any release or consent
of the Trustee.
(c) Any disposition of Collateral made in compliance with the
provisions of this Section 4.3 shall be deemed not to impair the security
interests under the Mortgage and hereunder in contravention of the provisions of
this Indenture.
(d) The Trustee shall release, modify or subordinate any Lien on, or
security interest in, the Collateral of the Securityholders in the event a Lien
on, or security interest in, the Collateral which ranks superior to or pari
passu with, or exclusive shall arise in accordance with the terms of this
Indenture.
Section 4.4. Net Cash Proceeds Account
-------------------------
(a) All Net Cash Proceeds received by the Company or any Guarantor
from an Asset Sale and as Insurance Proceeds (collectively, the "Cash
Collateral") shall be deposited in an account (the "Net Cash Proceeds Account"),
in which there shall be an exclusive and perfected security interest in favor of
the Trustee for the equal and ratable benefit of the Holders, without
preference, priority, or distinction of any thereof over any other thereof by
reason of difference in time of issuance, sale or otherwise, as security for the
prompt and complete payment and performance in full of the Indenture
Obligations. The funds from time to time on deposit in the Net Cash Proceeds
Account resulting from an Asset Sale may be disbursed from such account only for
the purposes and in the manner provided for pursuant to Section 5.14 hereof. All
other funds may be used at any time (in addition to any other use herein
permitted) to redeem the Securities.
(b) In its discretion, the Company may request the Trustee, as
collateral agent, in writing to, and the Trustee, as collateral agent, shall,
invest any Cash Collateral in the Cash Collateral Account as provided for in the
Security Agreement; provided, that the Trustee shall retain an exclusive, valid
and perfected security interest in the proceeds of the funds so invested.
(c) Interest and other amounts earned on Cash Collateral shall be held
in the Cash Collateral Account as provided in the Security Agreement.
Section 4.5. Certain Releases of Collateral.
------------------------------
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Subject to applicable law, the release of any Collateral from Liens
created by the Mortgage or the release of, in whole or in part, the Liens
created by the Mortgage, will not be deemed to impair the Mortgage in
contravention of the provisions of this Indenture if and to the extent the
Collateral or Liens are released pursuant to, and in accordance with, the
applicable agreement creating the Mortgage and pursuant to, and in accordance
with, the terms hereof. To the extent applicable, without limitation, the
Company and each obligor on the Securities shall cause Trust Indenture Act ss.
314(d) relating to the release of Property or securities from the Liens of the
Mortgage to be complied with. Any certificate or opinion required by TIA ss.
314(d) may be made by one officer prior to the qualification of the Indenture
under the TIA and by two officers after such qualification, except in cases
which Trust Indenture Act ss. 314(d) requires that such certificate or opinion
be made by an independent person.
Upon written request of the Company, subject to applicable law, and
presentation to the Collateral Agent of an Officers' Certificate evidencing
compliance with Section 5.14, the Collateral Agent shall release funds (and the
Trustee's Lien with respect thereto) in accordance with the terms of the Cash
Collateral and Disbursement Agreement; provided, that the Lien on the funds so
released shall immediately attach in like manner to the assets and property
purchased by the Company with such funds (except to the extent such funds are
applied to the repayment of Securities in compliance with the requirements of
this Indenture) to the extent required by this Indenture.
Section 4.6. Payment of Expenses.
-------------------
On demand of the Trustee, the Company forthwith shall pay or
satisfactorily provide for all reasonable expenditures incurred by the Trustee
under this Article IV, including the reasonable fees and expenses of counsel and
all such sums shall be a Lien upon the Collateral and shall be secured thereby.
Section 4.7. Suits to Protect the Collateral.
-------------------------------
Subject to Section 4.1 of this Indenture and to the provisions of the
Mortgage, the Trustee shall have power to institute and to maintain such suits
and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts which may be unlawful or in violation of the Mortgage or
this Indenture, including the power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid or if the enforcement of, or compliance with, such enactment,
rule or order
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would impair the security interests in contravention of this Indenture or be
prejudicial to the interests of the Holders or of the Trustee. The Trustee shall
give notice to the Company promptly following the institution of any such suit
or proceeding.
Section 4.8. Trustee's Duties.
----------------
The powers and duties conferred upon the Trustee by this Article IV are solely
to protect the security interests and shall not impose any duty upon the Trustee
to exercise any such powers and duties, except as expressly provided in this
Indenture. The Trustee shall be under no duty to the Company or any Guarantor
whatsoever to make or give any presentment, demand for performance, notice of
nonperformance, protest, notice of protest, notice of dishonor, or other notice
or demand in connection with any Collateral, or to take any steps necessary to
preserve any rights against prior parties except as expressly provided in this
Indenture. The Trustee shall not be liable to the Company or any Guarantor for
failure to collect or realize upon any or all of the Collateral, or for any
delay in so doing, nor shall the Trustee be under any duty to the Company or any
Guarantor to take any action whatsoever with regard thereto. The Trustee shall
have no duty to the Company or any Guarantor to comply with any recording,
filing, or other legal requirements necessary to establish or maintain the
validity, priority or enforceability of the security interests in, or the
Trustee's rights in or to, any of the Collateral.
Section 4.9. Excess Cash Collateral Account.
------------------------------
(a) All Excess Cash, as determined pursuant to Section 5.20 hereof,
shall be deposited in an account (the "Excess Cash Collateral Account"), in
which there shall be an exclusive and perfected security interest in favor of
the Trustee for the equal and ratable benefit of the Holders, without
preference, priority, or distinction of any thereof over any other thereof by
reason of difference in time of issuance, sale or otherwise, as security for the
prompt and complete payment and performance in full of the Indenture
Obligations. The funds from time to time on deposit in the Excess Cash
Collateral Account may be disbursed from such account only for the purposes and
in the manner provided for pursuant to Section 5.20 hereof.
(b) In its discretion, the Company may request the Trustee, as
collateral agent, in writing to, and the Trustee, as collateral agent, shall,
invest any Cash in the Excess Cash Collateral Account as provided for in the
Security Agreement; provided, that the Trustee shall retain an exclusive, valid
and
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perfected security interest in the proceeds of the funds so invested.
(c) Interest and other amounts earned on Cash in the Excess Cash
Collateral Account shall be held in the Excess Cash Collateral Account and be
subject to the terms of this Section 4.9 and Section 5.20 hereof.
ARTICLE V.
COVENANTS
Section 5.1. Payment of Securities
---------------------
The Company shall pay the principal of and interest on the Securities
(other than in respect of the Amended Original Guaranty) on the dates and in the
manner provided in the Securities and this Indenture. The Original Guarantor
shall pay the principal of and interest on the Amended Original Guaranty as
provided in Section 13.1. An installment of principal of or interest on the
Securities shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, U.S. Legal Tender deposited and designated for and sufficient to pay the
installment.
The Company shall pay interest on overdue principal and on overdue
installments of interest at the rate specified in the Securities (other than in
respect of the Amended Original Guaranty) compounded semi-annually, to the
extent lawful. The Original Guarantor shall pay interest on overdue principal
and overdue installments of interest at the rate specified in respect of the
Amended Original Guaranty compounded semi-annually, to the extent lawful.
Section 5.2. Maintenance of Office or Agency.
-------------------------------
Each of the Company and each Guarantor shall maintain in Borough of
Manhattan, City of New York, an office or agency where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
each of the Company and each Guarantor in respect of the Securities and this
Indenture may be served. Each of the Company and each Guarantor shall give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time any of the Company or any
Guarantor shall fail to maintain any such required office or agency or shall
fail to furnish the Trustee with the address thereof, such presentations,
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surrenders, notices and demands may be made or served at the address of the
Trustee set forth in Section 14.2.
Any of the Company or any Guarantor may also from time to time
designate one or more other offices or agencies where the Securities may be
presented or surrendered for any or all such purposes and may from time to time
rescind such designations. Any of the Company or any Guarantor shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency. The Company and the
Guarantor hereby initially designate the Corporate Trust Office of the Trustee
as such office.
Section 5.3. Limitation on Restricted Payments.
---------------------------------
(a) Each of the Company and each Guarantor will not, and none will
permit any of their respective Subsidiaries to, directly or indirectly, make any
Restricted Payment if, immediately prior thereto or after giving effect thereto
on a pro forma basis, (1) a Default or an Event of Default shall have occurred
and be continuing, (2) immediately after giving effect to such Restricted
Payment on a pro forma basis, the Company could not incur at least $1.00 of
additional Indebtedness pursuant to Section 5.11(a) hereof, or (3) the aggregate
amount of all Restricted Payments made by the Company, each Guarantor and their
respective Subsidiaries, including after giving effect to such proposed
Restricted Payment on a pro forma basis, from and after the Issue Date, would
exceed the sum of (a) 50% of the aggregate Consolidated Net Income of the
Company and its Consolidated Subsidiaries for a period (taken as one accounting
period) commencing on the first day of the first fiscal quarter commencing
immediately following the Issue Date and ending on the last day of the last full
fiscal quarter ending immediately preceding the date of such proposed Restricted
Payment (or, in the event Consolidated Net Income for such period is a deficit,
then 100% of such deficit), plus (b) the aggregate Net Cash Proceeds from the
sale of its Qualified Capital Stock (other than to a Subsidiary of the Company)
after the Issue Date.
(b) The foregoing clauses (2) and (3) of the prior paragraph, however,
will not prohibit (i) a Permitted Regulatory Redemption of Capital Stock or of
Indebtedness; (ii) Investments in the form of CDGC Notes by the Company or any
Subsidiary of the Company; (iii) the payment of any dividend on or redemption of
Qualified Capital Stock within 60 days after the date of its declaration or
authorization, respectively, if such dividend or redemption could have been made
on the date of such declaration or authorization in compliance with the
foregoing provisions; (iv) Investments by the Company or any Subsidiary of the
Company in Native American tribes or bands, or Investments in any person formed
or to be formed (and in which the Company or any Guarantor owns Capital Stock (a
"Joint Venture")), as the case may be, in each case in connection with a
proposed or operating Native American Casino, and with respect to which Casino,
the Company or each Guarantor has an effective Native American Casino Management
Contract which has been pledged to the Trustee for the benefit of the Holders of
Securities (other than in respect of the Amended Original Guaranty) pursuant to
an Assignment of Rights, and in the case of an Investment in a Joint Venture,
the Company or any
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Guarantor has pledged the Capital Stock thereof owned thereby, and any and all
rights under any such joint venture agreement in respect of such joint venture,
to the Trustee for the benefit of the Holders of Securities (other than in
respect of the Amended Original Guaranty), in each case for the purpose of
constructing, developing, refurbishing or expanding such Casinos or paying the
costs of any such tribe or band (including, without limitation, legal fees and
Tribal Gaming Commission fees) in connection with a Native American Casino
Management Contract, provided, the aggregate amount of all Investments made
pursuant to this clause (iv) at any time outstanding shall not exceed
$10,000,000; (v) a Qualified Exchange; (vi) a Qualified Restricted Investment;
or (vii) a loan to any officer, director or employee of the Company or its
Subsidiaries, provided that (A) the aggregate amount of all loans to any such
person does not exceed the person's aggregate tax liability with respect to
distributions under the Plan and (B) any such loans are (1) secured by the
securities which are the subject of such distributions and (2) immediately
payable from any cash proceeds (net of taxes) in respect of any sale or
distribution of such securities. Unless in respect of an Authorized Transaction
or an Additional Transaction, the full amount of any Restricted Payment made
pursuant to any of clauses (i), (ii), (iii), (iv), (v), (vi) or (vii) (but in
the case of clauses (v) or (vi) only to the extent Net Cash Proceeds received in
respect of any such transaction, but for this sentence, increased the amounts
available pursuant to clause (3) of the immediately preceding paragraph),
however, will be deducted in the calculation of the aggregate amount of
Restricted Payments available to be made referred to in clause (3) of the
immediately preceding paragraph.
Section 5.4. Corporate Existence.
-------------------
Subject to Article VI, each of the Company and each Guarantor shall do
or cause to be done all things necessary to preserve and keep in full force and
effect their corporate existence and the corporate or other existence of their
respective Subsidiaries in accordance with the respective organizational
documents of each of them and the rights (charter and statutory) and corporate
franchises of the Company, each Guarantor and each of their respective
Subsidiaries; provided, however, that none of the Company or any Guarantor shall
be required to preserve, with respect to itself, any right or franchise if (a)
the Board of Directors of the Company shall determine reasonably and in good
faith that the preservation thereof is no longer desirable in the conduct of the
business of the Company and (b) the loss thereof is not disadvantageous in any
material respect to the Holders of Securities (other than in respect of the
Amended Original Guaranty).
Section 5.5. Payment of Taxes and Other Claims.
---------------------------------
Each Company and each Guarantor shall, and shall cause each of their
respective Subsidiaries to, pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (i) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company, such
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Guarantor or any of their respective Subsidiaries, or Properties and assets of
the Company, such Guarantor or any such Subsidiaries and (ii) all lawful claims,
whether for labor, materials, supplies, services or anything else, which have
become due and payable and which by law have or may become a Lien upon the
Property and assets of the Company, any Guarantor or any of their respective
Subsidiaries; provided however, that none of the Company or any Guarantor shall
be required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim, the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been established in accordance with GAAP.
Section 5.6. Maintenance of Insurance.
------------------------
From and at all times after the Issue Date, each of the Company and
each Guarantor shall, and shall cause each of their respective Subsidiaries to,
have in effect customary comprehensive general liability insurance on terms and
in an amount reasonably sufficient (taking into account, among other factors,
the creditworthiness of the insurer) to avoid a material adverse change in the
financial condition or results of operation of the Company and its Subsidiaries
taken as a whole.
Section 5.7. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee within 90 days after the
end of its fiscal year an Officers' Certificate complying (whether or not
required) with Section 314(a)(4) of the TIA and stating that a review of its
activities and the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture and further stating, as to each such Officer
signing such certificate, whether or not the signer knows of any failure of the
Company, any Guarantor or any Subsidiary of the Company or any Guarantor to
comply with any conditions or covenants in this Indenture and, if such signer
does know of such a failure to comply, the certificate shall describe such
failure with particularity. The Officers' Certificate shall also notify the
Trustee should the relevant fiscal year end on any date other than the current
fiscal year end date.
(b) So long as not contrary to the then current recommendation of the
American Institute of Certified Public Accountants, the Company shall deliver to
the Trustee within 120 days after the end of each of its fiscal years a written
report of a firm of independent certified public accountants with an established
national reputation stating that in conducting their audit for such fiscal year,
nothing has come to their attention that caused them to believe that the Company
or any Subsidiary of the Company was not in compliance with the provisions set
forth in Sections 5.3, 5.10, 5.11, 5.14, 5.15, 5.18 or 5.19 of this Indenture.
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(c) The Company shall, so long as any of the Securities (other than in
respect of the Amended Original Guaranty) are outstanding, deliver to the
Trustee, immediately upon becoming aware of any Default or Event of Default
under this Indenture, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposing to take with
respect thereto. The Trustee shall not be deemed to have knowledge of a Default
or an Event of Default unless one of its trust officers receives notice of the
Default giving rise thereto from the Company or any of the Holders.
Section 5.8. Reports.
-------
Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the SEC, annual and quarterly consolidated financial
statements substantially equivalent to financial statements that would have been
included in reports filed with the SEC if the Company were subject to the
requirements of Section 13 or 15(d) of the Exchange Act including, with respect
to annual information only, a report thereon by the Company's certified
independent public accountants as such would be so required, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required. Notwithstanding anything to the contrary,
the Trustee shall have no duty to review such documents for purposes of
determining compliance with any provisions of this Indenture.
Section 5.9. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each of the Company and each Guarantor covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law wherever enacted which would
prohibit or forgive the Company or any Guarantor from paying all or any portion
of the principal of or interest on the Securities as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that they may
lawfully do so) each of the Company and each Guarantor hereby expressly waives
all benefit or advantage of any such law insofar as such law applies to the
Securities, and covenants that it shall not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
Section 5.10. Limitation on Transactions with Affiliates.
------------------------------------------
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(a) Subject otherwise to their compliance with Section 5.18 hereof,
each of the Company and each Guarantor shall not, nor shall any of them cause
any of their respective Subsidiaries to, on or after the Issue Date, directly or
indirectly, enter into any transaction, including any contract, agreement,
understanding, loan, advance or guarantee, and including any series of related
transactions, with or for the benefit of any of their respective Affiliates,
including CDGC and its Subsidiaries but excluding the Company or another
Subsidiary of the Company, none of whose capital stock is owned directly or
indirectly by any Affiliate of the Company other than through the Company or its
Subsidiaries (an "Affiliate Transaction"), except for transactions in respect of
which the aggregate value, remuneration or other consideration (to either party)
of all such transactions and related transactions consummated in the year in
which such transaction is proposed to be consummated (i) is less than or equal
to $500,000, (ii) is greater than $500,000 and less than or equal to $5,000,000,
provided, that, prior to the consummation thereof, the Company, such Guarantor
or such Subsidiary shall deliver Board Resolutions to the Trustee evidencing
that the Board of Directors of the Company, such Guarantor or such Subsidiary,
as applicable, determined in good faith that the aggregate value, remuneration
or other consideration inuring to the benefit of such Affiliate from any such
transaction is not greater than that which would be charged to or extended by
the Company, such Guarantor or such Subsidiary, as the case may be, on an
arm's-length basis for similar Properties, assets, rights, goods or services by
or to a person not affiliated with the Company, each Guarantor or such
Subsidiary, as the case may be, and (iii) greater than $5,000,000; provided,
that prior to the consummation thereof, the Company, such Guarantor or such
Subsidiary shall deliver to the Trustee Board Resolutions as described in clause
(i) of this Section 5.10 and an opinion of a nationally recognized investment
banking firm (or other appropriate expert) unaffiliated with the Company and the
Affiliate which is party to such transaction, to the effect that the aggregate
value, remuneration or other consideration inuring to the benefit of such
Affiliate from any such transaction is not greater than that which would be
charged to or extended by the Company, such Guarantor or such Subsidiary, as the
case may be, on an arm's-length basis for similar Properties, assets, rights,
goods or services by or to a person not affiliated with the Company, such
Guarantor or such Subsidiary, as the case may be.
(b) The provisions of Section 5.10(a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the provisions of Section
5.3 hereof, (ii) any agreements between the Company, the Guarantor or any of
their respective Subsidiaries, as applicable, and an Affiliate in existence on
the date hereof, (iii) any issuance of securities, or
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other payments, awards of grants in cash, securities or otherwise pursuant to,
or the funding of, employment arrangements, stock options and stock ownership
plans approved by the Board of Directors, (iv) loans or advances to employees in
the ordinary course of business consistent with past practices, not to exceed
$500,000 aggregate principal amount outstanding at any time, (v) an Investment
described in clause (b) of the proviso to the definition of Restricted
Investments and (vi) the payment of fees and compensation paid to, and indemnity
provided on behalf of officers, directors, employees or consultants of the
Company, each Guarantor or any of their respective Subsidiaries, as determined
by the Board of Directors of the Company in good faith.
Section 5.11. Limitation on Incurrence of Additional Indebtedness.
---------------------------------------------------
Except as set forth below, from and after the Issue Date, the Company
and the Guarantors shall not, and shall not permit any of their respective
Subsidiaries to, directly or indirectly, issue, assume, guaranty, incur, become
directly or indirectly liable with respect to (including as a result of an
acquisition, merger or consolidation), extend the maturity of, or otherwise
become responsible for, contingently or otherwise (individually and
collectively, to "incur," or, as appropriate, an "incurrence"), any
Indebtedness. Notwithstanding the foregoing:
(a) The Company and any Subsidiary of the Company may incur
Indebtedness if (i) no Default or Event of Default shall have occurred and be
continuing at the time of, or would occur after giving effect, on a pro forma
basis, to, such incurrence of such Indebtedness and (ii) on the date of the
incurrence of such Indebtedness (the "Incurrence Date"), the Consolidated
Coverage Ratio of the Company for the Reference Period immediately preceding the
Incurrence Date, after giving effect on a pro forma basis to such incurrence of
such Indebtedness, would be at least 1.75 to 1;
(b) The Company and any Subsidiary of the Company may incur
Indebtedness, provided, that the aggregate amount of such Indebtedness of the
Company and its Subsidiaries (exclusive of Permitted FF&E Financing and
Non-recourse Indebtedness) outstanding at any time shall not exceed two million
dollars ($2,000,000);
(c) The Company and any Subsidiary of the Company may incur
Indebtedness evidenced by the Securities and other obligations pursuant to the
Indenture up to the amounts specified herein as of the Issue Date;
(d) The Company and any Subsidiary of the Company may incur
Indebtedness consisting of Permitted FF&E Financing, provided, that the
aggregate amount of Indebtedness incurred pursuant to this paragraph (d)
(including any Indebtedness issued to refinance, replace or refund such
Indebtedness) shall not constitute more than 100% of the cost (reportable on the
balance sheet (including all appropriate notes thereto) of such person in
accordance with GAAP) to the Company, its Subsidiaries or any Native American
Tribe of the FF&E so purchased or leased;
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(e) The Company and any Subsidiary of the Company may incur
Non-recourse Indebtedness; and
(f) The Company and any Subsidiary of the Company may incur
Refinancing Indebtedness with respect to any Indebtedness, as applicable,
described in clauses (a) through (e) of this Section 5.11 so long as, in the
case of Indebtedness used to refinance, refund, or replace Indebtedness in
clause (d), such Refinancing Indebtedness satisfies the applicable requirements
of such clauses.
Notwithstanding the foregoing limitations, the limitations of this
Section 5.11 shall not apply to the incurrence of Permitted Indebtedness.
Section 5.12. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
------------------------------------------
(a) None of the Company or any Guarantor shall, and none shall permit
any of their respective Subsidiaries (other than CDGC and any Subsidiary
thereof, except as provided in Section 5.12(b)) to, directly or indirectly,
create, assume or suffer to exist any consensual encumbrance or restriction on
the ability of any such Subsidiary to pay dividends or make other distributions
to, or to pay any obligation to, or to otherwise transfer assets or make or pay
loans or advances to, the Company or any Subsidiary of the Company, except (a)
restrictions imposed by the Securities or the Indenture, (b) reasonable and
customary provisions restricting subletting or assignment of any lease entered
into in the ordinary course of business, consistent with industry practices, (c)
restrictions imposed by applicable law, (d) restrictions under any Acquired
Indebtedness or any agreement relating to any Property, asset, or business
acquired by the Company or any of its Subsidiaries, which restrictions existed
at the time of acquisition, were not put in place in connection with or in
anticipation of such acquisition and are not applicable to any person, other
than the Property, assets and business so acquired, (e) any restrictions with
respect solely to a Subsidiary of the Company imposed pursuant to a binding
agreement (subject only to reasonable and customary closing conditions and
termination provisions) which has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such Subsidiary,
provided such restrictions apply solely to the Capital Stock or assets to be
sold of such Subsidiary, (f) restrictions arising in respect of an Authorized
Transaction or an Additional Transaction which are described in the materials
submitted to the Advisory Committee in connection with its approval thereof, and
(g) replacements of restrictions imposed pursuant to clauses (d) and (f) and
this clause (g) that are not more restrictive than those being replaced and do
not apply to any additional property or assets.
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(b) None of CDGC and any Subsidiary thereof shall be permitted to,
directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of CDGC or any such Subsidiary to make
payments in respect of the CDGC Notes.
Section 5.13. Limitation on Liens.
-------------------
None of the Company or any Guarantor shall, and none shall permit any
of their respective Subsidiaries to, directly or indirectly, create, incur,
assume or suffer to exist any Lien in or on any right, title or interest to any
of their respective Properties or assets, except for (a) Permitted Liens, (b)
Liens incurred pursuant to Permitted FF&E Financing or Non-recourse Indebtedness
incurred in accordance with the provisions of paragraph (d) or (e),
respectively, of Section 5.11, which Liens may be exclusive Liens on such
Permitted FF&E or in respect of such Non-recourse Indebtedness, (c) Liens
incurred pursuant to Permitted Indebtedness, (d) Liens incurred in respect of
obligations described in the second proviso to the definition of Indebtedness
and (e) Liens incurred in connection with the incurrence of Refinancing
Indebtedness in accordance with the provisions of paragraph (f) of Section 5.11,
provided, that such Liens (described in this clause (e)) are not more adverse to
the interests of the Holders of the Securities (other than in respect of the
Amended Original Guaranty) than the Liens replaced or extended thereby,
provided, further, that such Liens (described in this clause (e)) replaced or
extended were permitted hereby.
Section 5.14. Limitation on Sales of Assets and Subsidiary
Stock; Event of Loss.
--------------------------------------------
(a) Other than upon an Event of Loss, none of the Company or any
Guarantor shall, and none shall permit any of their respective Subsidiaries
(other than CDGC and its Subsidiaries) to, in one or a series of related
transactions, convey, sell, lease, transfer, assign or otherwise dispose of,
directly or indirectly, any of its Property, business or assets (other than
payments made pursuant to the terms of the Securities), including, without
limitation, (i) upon any sale or other transfer or issuance of any Capital Stock
of any Subsidiary of the Company, (ii) any sale and leaseback transaction,
whether by the Company or a Subsidiary of the Company (other than CDGC and its
Subsidiaries), or (iii) through the transfer or other disposition of any
proceeds from an Event of Loss (each, an "Asset Sale"), unless (1) the Board of
Directors of the Company or such Guarantor determines in good faith, prior to
the consummation of the transaction(s), that the Company or such Guarantor, as
applicable, received fair market value for such Asset Sale; (2) at least 75% of
the value, remuneration or other consideration (other than liabilities to which
the assets transferred in such Asset Sale were subject and liabilities assumed
by or on behalf of the acquiring person in such Asset Sale) for such Asset Sale
(excluding property that promptly after such Asset Sale is converted into U.S.
Legal Tender) consists of U.S. Legal Tender or Cash Equivalents; (3) no Default
or Event of Default shall have occurred
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and be continuing at the time of, or would occur after giving effect, on a pro
forma basis, to such Asset Sale; and (4)(x) within 365 days after the date of
such Asset Sale, the Net Cash Proceeds therefrom (the "Asset Sale Offer Amount")
are applied to the repurchase of the Securities (other than in respect of the
Amended Original Guaranty) pursuant to an irrevocable, unconditional offer (the
"Asset Sale Offer") to repurchase Securities (other than in respect of the
Amended Original Guaranty) at a purchase price (the "Asset Sale Offer Price") of
100% of the principal amount thereof, together with accrued and unpaid interest
on the principal amount purchased to the date of payment, or (y) if the
Securityholders decline such Asset Sale Offer, within 400 days of such Asset
Sale, the Asset Sale Offer Amount is invested in assets and Property (excluding
inventory) directly related to a Related Business of the Company or a Subsidiary
of the Company. Notwithstanding the foregoing provisions of this paragraph:
(i) the Company and any Subsidiary of the Company may in the
ordinary course of business and consistent with past practices,
convey, sell, lease, transfer, assign, or otherwise dispose of assets
acquired and held for resale in the ordinary course of business;
(ii) the Company and any Subsidiary of the Company may
convey, sell, lease, transfer or otherwise dispose of assets pursuant
to and in accordance with the limitation on mergers, sales or
consolidations provisions in the Indenture, provided that any assets
not conveyed, sold, leased, transferred or otherwise disposed of in
each such transaction shall constitute an "Asset Sale" as provided
herein;
(iii) the Company and any Subsidiary of the Company may sell
damaged, worn out or other obsolete Property in the ordinary course of
business so long as such Property is no longer necessary for the
proper conduct of the business of the Company and the Guarantors, as
applicable;
(iv) the Company and any Subsidiary of the Company may
convey, sell, transfer, assign or otherwise dispose of assets to the
Company or any other Subsidiary of the Company;
(v) the Company and any Subsidiary of the Company may sell,
transfer, assign or otherwise dispose of any Securities owned by the
Company, or any Subsidiary of the Company in compliance with all
applicable laws and regulations; provided the Company obtain the prior
approval of the Advisory Committee; and
(vi) in addition to assets sold pursuant to clauses (i),
(ii), (iii), (iv) and (v) above, the Company and any Subsidiary of the
Company may convey, sell, lease,
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transfer, assign, or otherwise dispose of assets in the ordinary
course of business, provided, the fair market value of any assets
disposed of in any single transaction or series of related
transactions does not exceed $10,000 and the aggregate fair market
value of all such assets does not exceed $5,000,000 on or after the
Issue Date.
The Company shall accumulate all Net Cash Proceeds from all Assets
Sales described in clause (iv) above (to be maintained in the Net Cash Proceeds
Account in which the Trustee on behalf of the Holders shall have an exclusive,
perfected security interest, pending reinvestment of such Net Cash Proceeds),
and the aggregate amount of such accumulated Net Cash Proceeds not used for the
purposes permitted by this Section 5.14(a) and within the time provided by this
Section 5.14(a) shall be referred to as the "Accumulated Amount."
(b) For the purpose of this Section 5.14, "Minimum Accumulation Date"
means each date on which the Accumulated Amount exceeds $7,500,000. Not later
than 10 Business Days after each Minimum Accumulation Date, the Company shall
commence an Asset Sale Offer to the Holders to purchase, on a pro rata basis,
for U.S. Legal Tender Securities having a principal amount (the "Asset Sale
Offer Amount") equal to the Accumulated Amount, at a purchase price (the "Asset
Sale Offer Price") equal to 100% of principal amount, plus accrued but unpaid
interest to, and including, the date (the "Asset Sale Purchase Date") of the
Securities (other than in respect of the Amended Original Guaranty) tendered are
purchased and paid for in accordance with this Section 5.14. Notice of an Asset
Sale Offer shall be sent 20 Business Days prior to the close of business on the
Asset Sale Put Date (as defined below), by first-class mail, by the Company to
each Holder at its registered address, with a copy to the Trustee. The notice to
the Holders shall contain all information, instructions and materials required
by applicable law or otherwise material to such Holders' decision to tender
Securities pursuant to the Asset Sale Offer. The notice, which (to the extent
consistent with this Indenture) shall govern the terms of the Asset Sale Offer,
shall state:
(1) that the Asset Sale Offer is being made pursuant to such
notice and this Section 5.14;
(2) the Asset Sale Offer Amount, the Asset Sale Offer Price
(including the amount of accrued and unpaid interest), the Asset Sale
Put Date, and the Asset Sale Purchase Date, which Asset Sale Purchase
Date shall be on or prior to 30 Business Days following the date the
Accumulated Amount was at least $7,500,000 million;
(3) that any Security or portion thereof not tendered or
accepted for payment will continue to accrue interest, if interest is
then accruing;
(4) that, unless the Company defaults in depositing U.S.
Legal Tender with the Paying Agent (which
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<PAGE>
may not for purposes of this Section 5.14, notwithstanding anything in
this Indenture to the contrary, be the Company or any Affiliate of the
Company) in accordance with the last paragraph of this clause (b), any
Security, or portion thereof, accepted for payment pursuant to the
Asset Sale Offer shall cease to accrue interest after the Asset Sale
Purchase Date;
(5) that Holders electing to have a Security, or portion
thereof, purchased pursuant to an Asset Sale Offer will be required to
surrender their Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the
Paying Agent (which may not for purposes of this Section 5.14,
notwithstanding any other provision of this Indenture, be the Company
or any Affiliate of the Company) at the address specified in the
notice prior to the close of business on the third Business Day prior
to the Asset Sale Purchase Date (the "Asset Sale Put Date");
(6) that Holders will be entitled to withdraw their
elections, in whole or in part, if the Paying Agent (which may not for
purposes of this Section 5.14, notwithstanding any other provision of
this Indenture, be the Company or any Affiliate of the Company)
receives, up to the close of business on the Asset Sale Put Date, a
telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Securities the Holder
is withdrawing and a statement that such Holder is withdrawing his
election to have such principal amount of Securities purchased;
(7) that if Securities in a principal amount in excess of
the principal amount of Securities to be acquired pursuant to the
Asset Sale Offer are tendered and not withdrawn, the Company shall
purchase Securities on a pro rata basis (with such adjustments as may
be deemed appropriate by the Company so that only Securities in
denominations of $1,000 or integral multiples of $1,000 shall be
required);
(8) that Holders whose Securities were purchased only in
part will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) the circumstances and relevant facts regarding such
Asset Sales.
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Any such Asset Sale Offer shall comply with all applicable provisions
of Federal and state laws, including those regulating tender offers, if
applicable, and any provisions of this Indenture that conflict with such laws
shall be deemed to be superseded by the provisions of such laws.
No later than 12:00 noon New York City time on an Asset Sale Purchase
Date, the Company shall (i) accept for payment Securities or portions thereof
properly tendered pursuant to the Asset Sale Offer (on a pro rata basis if
required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the Asset Sale Offer Price (plus accrued
interest) for all Securities or portions thereof so accepted and (iii) deliver
to the Trustee Securities so accepted together with an Officers' Certificate
setting forth the Securities or portions thereof being purchased by the Company.
The Paying Agent shall promptly mail or deliver to Holders of Securities so
accepted payment in an amount equal to the Asset Sale Offer Price for such
Securities, and the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Security equal in principal amount to any unpurchased portion
of the Security surrendered. Any Securities not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof.
(c) If the amount required to acquire all Securities tendered by
Holders pursuant to the Asset Sale Offer (the "Acceptance Amount") shall be less
than the Asset Sale Offer Amount, the excess of the Asset Sale Offer Amount over
the Acceptance Amount may be used by the Company for expenditures in conformity
with the terms of this Indenture without regard to the restrictions set forth in
this Section 5.14, unless otherwise restricted, and shall be transferred from
the Net Cash Proceeds Account to the Company or its Subsidiaries, as the case
may be, free and clear of any Lien created by this Indenture or the Mortgage,
but subject to any other applicable restriction in this Indenture by the other
provisions of this Indenture. Upon consummation of any Asset Sale Offer made in
accordance with the terms of Section 5.14(b), the Accumulated Amount (but only
to the extent offered to the Holders pursuant to the terms of Section 5.14(b))
as of the Minimum Accumulation Date shall be reduced to zero and accumulations
thereof shall be deemed to recommence from the date next following such Minimum
Accumulation Date.
(d) Upon an Event of Loss, the Company shall make an Asset Sale Offer
to repurchase at the Asset Sale Price (together with accrued interest) that
principal amount of Notes equal to the Net Proceeds of such Event of Loss (the
"Event of Loss Amount") within 180 days thereafter, unless the Asset Sale Amount
related to such Event of Loss is invested, within 180 days after such Event of
Loss, in assets and property directly related to a Related Business of the
Company or a Subsidiary of the Company.
Section 5.15. Maintenance of Consolidated Coverage Ratio.
------------------------------------------
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Beginning 60 days after the end of the first full fiscal quarter
commencing after the second (2nd) anniversary of the Issue Date, the Company
shall maintain a Consolidated Coverage Ratio, as of the last day of each fiscal
quarter, of at least 1.5 to 1, and shall furnish to the Trustee an Officers'
Certificate within 60 days after the end of each such fiscal quarter (or 60 days
after the fourth fiscal quarter of any fiscal year) setting forth the
calculations of this ratio and stating that the Company is in compliance with
this covenant.
Section 5.16. Conduct of Business.
-------------------
The respective businesses conducted by each of the Company and each
Subsidiary and each of their respective Subsidiaries shall be limited to Related
Businesses; provided, that if such business is not a Related Business it shall
be an Authorized Transaction or an Additional Transaction.
Section 5.17. Limitation on Status as Investment Company.
------------------------------------------
Each of the Company and each Guarantor shall not become "investment
companies" (as that term is defined in the Investment Company Act of 1940, as
amended), or otherwise become subject to regulation under the Investment Company
Act.
Section 5.18. Authorized Transactions.
-----------------------
Until the Termination Date, without the approval of the Advisory
Committee, none of the Company or any Guarantor shall, and none of them shall
permit any of their respective Subsidiaries to, make any expenditure of Cash if:
(a) in respect of any New Project, such expenditure, together with all related
expenditures, exceeds $250,000; (b) in respect of any Developmental Expenses,
such expenditure, together with all other Developmental Expenses in any calendar
year, exceeds $500,000; (c) in respect of any Project (including, without
limitation, the CDGC Project), such expenditure, together with all related
expenditures exceeds the lower of (i) $750,000, (ii) an amount equal to the
excess of $1,200,000 over all expenditures previously incurred (other than such
related expenditures) in respect of such Project during the calendar year in
which such expenditure was incurred, if in each case such expenditure was
disapproved by action of the Advisory Committee or (iii) with respect to every
Project other than the CDGC Project, such lower amount as may be determined by
the Advisory Committee in connection with its authorizing any prior Authorized
Transaction; or (d) such expenditure is in payment of a bonus to Edward M.
Tracy. Anything in this Section 5.18 to the contrary notwithstanding,
expenditures for purposes of this Indenture shall not include (i) payments of
principal, premium or interest in respect of an Indebtedness of the Company or
any Guarantor
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permitted under Section 5.11 of this Indenture, (ii) expenditures
in respect of compensation or other benefits in respect of employees of the
Company or any of its Subsidiaries, (iii) any cost or expense of the Company,
the Guarantor or any of their respective Subsidiaries directly or indirectly
attributable to general administrative expenses or overhead, (iv) any use of
Cash required by this Indenture or the Securities. Anything in this Section 5.18
to the contrary notwithstanding, no approval shall be required for any
Additional Transaction beyond what is provided in Section 5.20(c) hereof.
Section 5.19. Bank Accounts.
-------------
None of the Company or any Guarantor shall, and none of them shall
permit any of their respective Subsidiaries to, deposit any Cash in any bank
other than the Trustee or its Affiliates) which bank has not duly executed and
delivered to the Collateral Agent an Agency Agreement.
Section 5.20. Excess Cash.
-----------
(a) No later than thirty (30) days prior to the end of a fiscal year,
the Company shall submit to the Advisory Committee a budget (the "Proposed
Budget") showing anticipated expenditures for the Company and its Subsidiaries,
on a consolidated basis, for the forthcoming fiscal year and for each fiscal
quarter of such fiscal year (the "Projected Expenditures"). Within five (5)
Business Days after the date the Proposed Budget is submitted, the Advisory
Committee shall inform the Company as to whether it approves or disapproves of
the Proposed Budget, which approval shall not be unreasonably withheld. If the
Advisory Committee informs the Company that it approves of the Proposed Budget,
or if it fails to inform the Company within the required time as to whether or
not it approves, the Proposed Budget shall be the definitive budget for the
forthcoming fiscal quarter (the "Definitive Budget"). If the Advisory Committee
informs the Company that it disapproves of the Proposed Budget, notice of such
disapproval shall be submitted with an affidavit and certification as set forth
in the definition of "Advisory Committee" in Section 1.1 hereof. Any disapproval
by the Advisory Committee of the Proposed Budget solely on the basis of any
payments or expenses (i) pursuant to any contract, agreement, understanding,
loan, advance or guarantee in effect as of the date hereof, or pursuant to any
amendment, modification, replacement or refunding of the same, (ii) in respect
of any Authorized Transaction, (iii) constituting a Restricted Payment or
Affiliate Transaction otherwise permitted to be effected pursuant to the terms
of this Indenture (including without limitation payments described in the
provisos to the definitions of Restricted Payments or Restricted Investments) or
(iv)
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constituting the repayment of any obligation in respect of any Indebtedness
(or any obligation which would have been Indebtedness but for the last proviso
to the definition of Indebtedness in this Indenture), the incursion of which was
permitted under this Indenture (including by operation of such proviso), shall
be deemed an approval. If the Advisory Committee has disapproved the Proposed
Budget on a basis other than those enumerated in the preceding sentence, then
the Company and the members of the Advisory Committee will negotiate in good
faith to determine the Definitive Budget.
(b) At any time during a fiscal year, the Company may submit an
amended Definitive Budget (an "Amended Budget") for approval by the Advisory
Committee. The procedure for approval or disapproval of the Amended Budget shall
be the same as set forth in Section 5.20(a) with respect to the Definitive
Budget. If the Amended Budget is approved, it shall become the Definitive
Budget. If the Amended Budget is not approved, the Definitive Budget shall
remain effective.
(c) At the end of each fiscal quarter, if the consolidated cash
position as determined under GAAP of the Company and its Subsidiaries exceeds
the Projected Expenditures shown in the Definitive Budget by greater than
$200,000, the amount by which the Cash exceeds $200,000 (the "Excess Cash")
shall be deposited into the Excess Cash Collateral Account. In computing the
consolidated cash position of the Company and its Subsidiaries for a given
quarter, (i) no Cash securing any Indebtedness (other than the Securities) of
the Company or any of its Subsidiaries, permissibly incurred pursuant to the
terms of this Indenture, will be included and (ii) all Cash of CDGC will (A) not
be included once a casino managed or operated pursuant to the CDGC Project opens
its doors to the public for business and (B) be reduced by $150,000 until such
time. To the extent any of the Excess Cash is attributable to a Subsidiary of
the Company, the nature of the corporate event by which the Subsidiary transfers
the Cash to the Company shall be determined at the sole discretion of each
Subsidiary.
(d) The Company will provide a certificate to the Trustee within thirty
(30) days after the end of each fiscal quarter certifying the amount of Excess
Cash.
(e) The funds from time to time on deposit in the Excess Cash
Collateral Account may not be disbursed from such account except upon the joint
written authorization of the Company and the Advisory Committee to the Trustee,
as collateral agent, such written authorization stating that the requested
disbursement is for one of the following purposes: (i) to redeem the Securities,
(ii) to make expenditures relating to an
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Authorized Transaction or (iii) to make expenditures relating to an Additional
Transaction. An "Additional Transaction" is any transaction to be entered into
by the Company and/or its Subsidiaries, including any contract, agreement,
understanding, loan, advance or guarantee, and including any series of related
transactions, such transaction having been affirmatively approved by both the
Company and the Advisory Committee. If the Company submits a proposed
transaction to the Advisory Committee for approval as an Additional Transaction
and the Advisory Committee fails to disapprove within five (5) Business Days
after the date on which the proposal in respect thereof was submitted thereto,
such transaction shall be deemed approved and shall for all purposes of this
Indenture be deemed to be an Additional Transaction. If the Advisory Committee
shall disapprove any such transaction, it shall provide to the Company, by
overnight courier or hand delivery, within fifteen (15) Business Days after the
date on which such proposal was submitted, an affidavit setting forth the
reasons for such disapproval and a certificate which certifies that such
disapproval was made in good faith and, in the Advisory Committee's opinion, in
the best interests of the Company and in the best interests of the Holders and
that such decision was not influenced in any way by interests of the members of
the Advisory Committee which are adverse to the interests of the Company;
provided, however if the Advisory Committee disapproves a transaction and fails
to provide the affidavit and certificate within 15 Business Days, the Advisory
Committee shall provide any such affidavit and certificate within ten (10)
calendar days after the date on which a proposal is submitted. If the Advisory
Committee fails to provide such affidavit and certificate within the required
time, such transaction shall be deemed approved and shall for all purposes of
this Indenture be deemed to be an Additional Transaction.
Section 5.21. Issuance of Common Stock.
------------------------
Until the Termination Date, the Company may issue shares of Common
Stock only so long as such issuance does not result in the total number of
shares of Common Stock outstanding exceeding 2,200,000 shares, unless such
issuance is an Authorized Transaction.
ARTICLE VI.
SUCCESSOR CORPORATION
Section 6.1. Limitation on Merger, Sale or Securities Consolidation.
------------------------------------------------------
None of the Company or any Guarantor shall consolidate with or merge
with or into another person, and none of the Company or its Subsidiaries shall,
directly or indirectly, sell,
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lease or convey assets constituting all or substantially all of the assets of
the Company and its Subsidiaries taken as a whole, whether in a single
transaction or a series of related transactions, to another person or group of
Affiliated persons, including any Subsidiary of the Company which is not a
Guarantor, unless:
(1) either (a) the Company or such Guarantor, as the case
may be, is the continuing entity or (b) the resulting, surviving or
transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of
the Company or such Guarantor, as the case may be, in connection with
the Securities and the Indenture;
(2) no Default or Event of Default shall exist or shall
occur immediately after giving effect on a pro forma basis to such
transaction;
(3) immediately after giving effect to such transaction, on
a pro forma basis, the Consolidated Net Worth of the surviving or
transferee entity is at least equal to the Consolidated Net Worth of
the Company immediately prior to such transaction;
(4) other than in the case of a transaction solely between
the Company and a Subsidiary of the Company, immediately after giving
effect to such transaction, on a pro forma basis, the surviving or
transferee entity would immediately thereafter be permitted to incur
at least $1.00 of additional Indebtedness pursuant to paragraph (a) of
Section 5.11;
(5) such transaction will not result in the loss of any
Gaming License; and
(6) the Company has delivered to the Trustee an Officers'
Certificate stating that such consolidation, merger, assignment, or
transfer and such supplemental indenture comply with this Article VI
and that all conditions precedent herein provided relating to such
transaction have been satisfied.
For purposes of this Section 6.1, the Consolidated Coverage Ratio
shall be determined on a pro forma consolidated basis (giving effect, on a pro
forma basis, to the transaction and any related incurrence of Indebtedness)
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for the four fiscal quarters which ended immediately preceding such transaction.
The sale, lease or conveyance of all or substantially all of the
Properties and assets of one or more Subsidiaries of the Company, which
Properties and assets, if held by the Company or any Guarantor, instead of such
Subsidiaries, would constitute all or substantially all of the Properties and
assets of the Company and the Guarantors on a consolidated basis shall be deemed
to be the transfer of all or substantially all of the Properties and assets of
the Company or the Guarantors, as the case may be.
Section 6.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger of the Company or any Guarantor, or
any direct or indirect sale, lease or conveyance by the Company or any
Subsidiary of the Company of assets constituting all or substantially all of the
Properties and assets of the Company and its Subsidiaries, taken as a whole, in
accordance with Section 6.1, the successor corporation formed by such
consolidation or into which the Company or such Guarantor, as the case may be,
is merged or to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of, the Company or such
Guarantor, as the case may be, under the Indenture and the Securities with the
same effect as if such successor corporation had been named therein as the
Company or such Guarantor, as the case may be, and the Company or such
Guarantor, as applicable, will be released from its obligations under the
Indenture and the Securities, except as to any obligations that arise from or as
a result of such transaction.
ARTICLE VII.
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the failure by the Company to pay any installment of
interest on the Securities (other than in
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respect of the Amended Original Guaranty) as and when due and payable
and the continuance of any such failure for 10 days;
(2) the failure by the Company (other than in respect of the
Amended Original Guaranty) to pay all or any part of the principal, or
premium, if any, on the Securities when and as the same become due and
payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, failure to pay any Offer to Purchase
Price, or otherwise;
(3) except as provided in clauses (1) or (2) of this Section
7.1, failure to have obtained Advisory Committee approval of a
Definitive Budget pursuant to Section 5.20(a) or failure of the
Company or any Guarantor or any Subsidiary thereof, as applicable, to
comply with any provision of Section 5.3, 5.10, 5.11, 5.12, 5.13,
5.15, 5.17, 5.18, 5.19, 5.20(d) or Section 6.1 which failure continues
for 30 days;
(4) except as otherwise provided herein, the failure by the
Company or any Guarantor to observe or perform any other covenant or
agreement contained in the Securities or the Indenture (other than in
each case Amended Original Guaranty Obligations) and the continuance
of such failure for a period of 30 days after written notice is given
to the Company by the Trustee or to the Company and Trustee by the
Holders of at least 25% in aggregate principal amount of the
Securities outstanding;
(5) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Company or a
Subsidiary of the Company as bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization of the Company or a
Subsidiary of the Company under any bankruptcy or similar law, and
such decree or order shall have continued undischarged and unstayed
for a period of 60 days; or a decree or order of a court of competent
jurisdiction in respect of the appointment of a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of the Company or a
Subsidiary of the Company, or of the Property of any such person, or
for the winding up or liquidation of the affairs of any such person,
shall have been entered, and such decree, judgment, or order shall
have remained in force undischarged and unstayed for a period of 60
days;
(6) the Company or a Subsidiary of the Company shall
institute proceedings to be adjudicated a voluntary
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bankrupt, or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent seeking
reorganization under any bankruptcy or similar law or similar statute,
or shall consent to the filing of any such petition, or shall consent
to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any of its assets or
property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fails generally to pay their debts
as they become due, or takes any corporate action in furtherance of or
to facilitate, conditionally or otherwise, any of the foregoing;
(7) a default in the payment of principal, premium or
interest when due which extends beyond any stated period of grace
applicable thereto or an acceleration for any other reason of maturity
of any Indebtedness (excluding Indebtedness described in clause (iii)
of the second proviso to the definition of Indebtedness) of the
Company or any Subsidiary of the Company with an aggregate principal
amount in excess of $500,000;
(8) final unsatisfied judgments not covered by insurance
aggregating in excess of $500,000, at any one time rendered against
the Company or a Subsidiary of the Company and not stayed, bonded or
discharged within 60 days;
(9) an event of default specified in the Mortgage; or
(10) any of the documents comprising the Mortgage fails to
become or ceases to be in full force and effect in accordance with the
terms of this Indenture, or ceases (once effective) to create in favor
of the Trustee, with respect to any material amount of Collateral, a
valid and perfected first priority Lien on the Collateral to be
covered thereby (unless a prior or exclusive Lien is specifically
permitted by this Indenture).
If a Default occurs and is continuing, the Trustee must, within 90
days after the occurrence of such default, give to the Holders notice of such
default.
Prior to the declaration of acceleration of the maturity of the
Securities, the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding may waive on behalf of all the Holders any
default,
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except a default in the payment of principal of or interest on any Security not
yet cured, or a default with respect to any covenant or provision which cannot
be modified or amended without the consent of the Holder of each outstanding
Security affected. Subject to the provisions of the Indenture relating to the
duties of the Trustee, the Trustee will be under no obligation to exercise any
of its rights or powers under the Indenture at the request, order or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Securities at the time outstanding will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
Section 7.2. Acceleration of Maturity Date; Rescission and Annulment.
-------------------------------------------------------
If an Event of Default (other than an Event of Default specified in
Section 7.1(5) or (6)) occurs and is continuing, then, and in every such case,
unless the principal of all of the Securities shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of then outstanding Securities, by a notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all of the principal of the Securities (and premium, if applicable),
determined as set forth below, together with accrued interest, thereon, to be
due and payable immediately. If an Event of Default specified in Section 7.1(5)
or (6) occurs, all principal of, premium applicable to, and accrued interest on,
the Securities shall be immediately due and payable on all outstanding
Securities without any declaration or other act on the part of the Trustee or
the Holders. The Holders of no less than a majority in aggregate principal
amount of Securities are authorized to rescind such acceleration if all existing
Events of Default, other than the non-payment of the principal of, premium, if
any, and interest on the Securities which have become due solely by such
acceleration, have been cured or waived.
At any time after such a declaration of acceleration being made and
before any judgment or decree for payment of any money due being obtained by the
Trustee as hereinafter provided in this Article VII, the Holders of a majority
in aggregate principal amount of then outstanding Securities, by written notice
to the Company and the Trustee, may waive, on behalf of all Holders, an Event of
Default or an event which with notice or lapse of time or both would become an
Event of Default if:
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(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities, (other
than in respect of the Amended Original Guaranty),
(B) the principal of (and premium, if any,
applicable to) any Securities (other than in respect of the
Amended Original Guaranty) which would become due otherwise
than by such declaration of acceleration, and interest
thereon at the rate borne by the Securities (other than in
respect of the Amended Original Guaranty),
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by
the Securities (other than in respect of the Amended
Original Guaranty),
(D) all sums paid or advanced by the Trustee
hereunder and the compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and
(2) all Events of Default, other than the non-payment of
amounts which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 7.13.
Notwithstanding the previous sentence of this Section 7.2, no waiver shall be
effective for any Event of Default or event which with notice or lapse of time
or both would become an Event of Default with respect to any covenant or
provision which cannot be modified or amended without the consent of the Holder
of each outstanding Security, unless all such affected Holders agree, in
writing, to waive such Event of Default or event. No such waiver shall cure or
waive any subsequent default or impair any right consequent thereon.
Section 7.3. Collection of Indebtedness and Suits
for Enforcement by Trustee.
--------------------------------------
The Company covenants that if an Event of Default in payment of
principal, premium, or interest specified in Section 7.1(1) and (2) occurs and
is continuing, the Company shall pay to the Trustee, for the benefit of the
Holders of the Securities (other than in respect of the Amended Original
Guaranty), the whole amount then due and payable on such Securities for
principal, premium (if any) and interest, and, to the extent that payment of
such interest shall be legally enforceable, interest
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on any overdue principal (and premium, if any) and on any overdue interest, at
the rate borne by such Securities, and, in addition thereto, such further amount
as shall be sufficient to cover the costs and expenses of collection, including
compensation to, and expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts to the Trustee, in its own
name and as trustee of an express trust in favor of such Holders, may institute
a judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the Property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of such
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
Section 7.4. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including
(i) to file and prove a claim for the whole amount of
principal (and premium, if any) and interest owing and unpaid in
respect of the Securities and to file such other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceeding, and
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(ii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 8.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 7.5. Trustee May Enforce Claims Without
Possession of Securities.
--------------------------------------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
Section 7.6. Priorities.
----------
(a) any money collected by the Trustee pursuant to this Article VII in
respect of Indenture Obligation shall be applied in the following order, at the
date or dates fixed by the Trustee and, in case of the distribution of such
money on account of principal, premium (if any) or interest, upon presentation
of the Securities and the notation thereon of the payment if only partially paid
and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 8.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest
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on, the Securities in respect of which or for the benefit of which such money
has been collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for principal,
premium (if any) and interest, respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
(b) Any money collected by the Trustee pursuant to this Article VII in
respect of the Amended Original Guaranty Obligations shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal, premium (if any) or
interest, upon presentation of the Securities (only in respect of the Amended
Original Guaranty) and the notation thereon of the payment if only partially
paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 8.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the Securities in respect of
which or for the benefit of which such money has been collected, ratably,
without preference or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any) and interest,
respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the remainder,
if any.
Section 7.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(A) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(B) the Holders of not less than 25% in principal amount of
then outstanding Securities shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee hereunder;
(C) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against
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the costs, expenses and liabilities to be incurred or reasonably
probable to be incurred in compliance with such request;
(D) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any
such proceeding; and
(E) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of
a majority in principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
Section 7.8. Unconditional Right of Holders to
Receive Principal, Premium and Interest.
----------------------------------------
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and interest on, such
Security on the Maturity Dates of such payments as expressed in such Security
(in the case of redemption, the Redemption Price on the applicable Redemption
Date, and in the case of the Offer Price, on the Asset Sale Purchase Date and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 7.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the placement or payment
of mutilated, destroyed, lost or stolen Securities in Section 2.7, no right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
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Section 7.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article VII or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
Section 7.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided, that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the Holders not taking part
in such direction, and
(3) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
Section 7.12. Waiver of Past Default.
----------------------
Subject to Section 7.8, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Securities may, by
written notice to the Trustee on behalf of all Holders, prior to the declaration
of the maturity of the Securities, waive any past default hereunder and its
consequences, except a default
(A) in the payment of the principal of, premium,
if any, or interest on, any Security as specified in clauses
(1) and (2) of Section 7.1, or
(B) in respect of a covenant or provision hereof
which, under Article X, cannot be modified or amended
without the consent of the Holder of each outstanding
Security affected.
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Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
Section 7.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 7.13 shall not apply to any suit instituted
by the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the Maturity Date of
such Security.
Section 7.14. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, each Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
Section 7.15. Cash Proceeds from Collateral.
-----------------------------
After the occurrence of an Event of Default, the Cash proceeds of any
Collateral obtained and/or disposed of pursuant to the terms of the Mortgage
shall be held by the Trustee in a separate custodial account in the name of the
Trustee (the "Trustee Account") for the equal and ratable benefit of the Holders
without preference, priority or distinction of any
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thereof by reason of difference in time of issuance, sale or otherwise.
ARTICLE VIII.
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
Section 8.1. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no
covenants or obligations shall be implied in or read into this
Indenture which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph
(b) of this Section 8.1.
(2) The Trustee shall comply with any order or directive of
a Gaming Authority that the Trustee submit an application for any
license, finding of suitability or other approval pursuant to any
Gaming Law and will cooperate fully and completely in any proceeding
related to such application.
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(3) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts.
(4) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 7.12.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or to take or omit to take any action
under this Indenture or at the request, order or direction of the Holders or in
the exercise of any of its rights or powers if it shall have reasonable grounds
for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 8.1.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
Section 8.2. Rights of Trustee.
-----------------
Subject to Section 8.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 14.4 and 14.5. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or opinion.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its
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discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Except with respect to Section 5.1, the Trustee shall have no duty
to inquire as to the performance of the Company's covenants in Article V hereof.
In addition, the Trustee shall not be deemed to have knowledge of any Default or
Event of Default except (i) any Event of Default occurring pursuant to Sections
7.1(1), 7.1(2) and 5.1, or (ii) any Default or Event of Default of which the
Trustee shall have received written notification or obtained actual knowledge.
Section 8.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company, any
Guarantor, any of their respective Subsidiaries, or their respective Affiliates
with the same rights it would have if it were not Trustee. Any agent may do the
same with like rights. However, the Trustee must comply with Sections 8.10 and
8.11.
Section 8.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, and it shall not be responsible for any
statement in the Securities, other than the Trustee's certificate of
authentication, or the use or application of any funds received by a Paying
Agent other than the Trustee.
Section 8.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice of
the uncured Default or Event of Default within 90 days after such Default or
Event of Default occurs. Except in the case of a Default or an Event of Default
in payment of principal (or premium, if any) of, or interest on, any Security
(including the payment of the Redemption Price on the Redemption Date and the
Asset Sale Offer Amount on the Asset Sale Purchase Date, as the case may be),
the Trustee may withhold the notice if and so long as a Trust Officer in good
faith determines that withholding the notice is in the interest of the
Securityholders.
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Section 8.6. Reports by Trustee to Holders.
-----------------------------
If required by law, within 60 days after each May 15 beginning with
the May 15 following the date of this Indenture, the Trustee shall mail to each
Securityholder a brief report dated as of such May 15 that complies with TIA ss.
313(a). If required by law, the Trustee also shall comply with TIA ss.ss. 313(b)
and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
Section 8.7. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, accountants,
experts and counsel.
The Company shall indemnify the Trustee (in its capacity as Trustee)
and each of its officers, directors, attorneys-in-fact and agents for, and hold
it harmless against, any claim, demand, expense (including but not limited to
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel), loss or liability incurred by them without negligence or bad faith on
its part, arising out of or in connection with the administration of this trust
and their rights or duties hereunder including the reasonable costs and expenses
of defending themselves against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder. The Trustee
shall notify the Company promptly of any claim asserted against the Trustee for
which it may seek indemnity. The Company shall defend the claim and the Trustee
shall provide reasonable cooperation at the Company's expense in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel; provided, that the Company will not be
required to pay such fees and expenses if it assumes the Trustee's defense and
there is no conflict of interest between the Company and the Trustee in
connection with such defense. The Company need not
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pay for any settlement made without its written consent. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.1(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 8.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article IX of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
Section 8.8. Replacement of Trustee.
----------------------
The Trustee may resign by notifying the Company in writing. The Holder
or Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section
8.1(d) or 8.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver, Custodian, or other public officer
takes charge of the Trustee or its property; or
(4) the Trustee become incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holder or
Holders of a majority in principal amount of the Securities may appoint a
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successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 8.7 have
been paid, the retiring Trustee shall transfer all property held by it as
Trustee to the successor Trustee, subject to the lien provided in Section 8.7,
the resignation or removal of the retiring Trustee shall become effective, and
the successor Trustee shall have all the rights, powers and duties of the
Trustee under this Indenture. A successor Trustee shall mail notice of its
succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 8.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
8.8, the Company's obligations under Section 8.7 shall continue for the benefit
of the retiring Trustee.
Section 8.9. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
Section 8.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA ss.
310(a)(1) and TIA ss. 310(a)(5). The Trustee shall have a combined capital and
surplus of at least $25,000,000 as set forth in its most recent published annual
report of condition. The Trustee shall comply with TIA ss. 310(b).
Section 8.11. Preferential Collection of Claims Against Company.
-------------------------------------------------
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The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
ARTICLE IX.
SATISFACTION AND DISCHARGE
Section 9.1. Satisfaction and Discharge of the Indenture.
-------------------------------------------
The Company shall be deemed to have paid and discharged the entire
Indebtedness on the Securities and the provisions of this Indenture shall cease
to be of further effect (subject to Section 9.3), if:
(1) The Company irrevocably deposits in trust with the
Trustee, pursuant to an irrevocable trust and security agreement in
form and substance reasonably satisfactory to the Trustee, (i) U.S.
Legal Tender, (ii) U.S. Government Obligations, or (iii) a combination
thereof, in an amount after payment of all Federal, state and local
taxes or other charges or assessments in respect thereof payable by
the Trustee, which through the payment of principal and interest will
provide, not later than one Business Day before the due date of
payment in respect of the Securities, U.S. Legal Tender in an amount
which, in the opinion of a nationally recognized firm of independent
certified public accountants expressed in a written certification
thereof (in form and substance reasonably satisfactory to the Trustee)
delivered to the Trustee, is sufficient to pay the principal of,
premium, if any, and each installment of principal and interest on the
Securities (other than in respect of the Amended Original Guaranty)
then outstanding on the dates on which any such payments are due and
payable in accordance with the terms of this Indenture and of the
Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) No Default or Event of Default shall have occurred or be
continuing on the date of such deposit or shall occur on or before the
91st day (or one day after such other greater period of time in which
any such deposit of trust funds may remain subject to bankruptcy or
insolvency laws) after the date of such deposit, and such deposit will
not result in a Default or Event of Default under this Indenture or a
breach or violation of, or
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constitute a default under, any other instrument to which the Company,
any Guarantor or any Subsidiary of the Company or the Guarantor is a
party or by which it or its Property is bound;
(4) The deposit, defeasance and discharge will not be
deemed, or result in, a Federal income taxable event to the Holders of
such Securities and the Holders will be subject to Federal income tax
only in the same amounts and in the same manner and at the same times
as would have been the case if such deposit and defeasance had not
occurred;
(5) The deposit shall not result in the Company, the Trustee
or the trust becoming an "investment company" under the Investment
Company Act of 1940;
(6) After the passage of 91 days (or any greater period of
time in which any such deposit of trust funds may remain subject to
any Bankruptcy Laws insofar as those laws apply to the Company)
following the deposit of the trust funds, such funds will not be
subject to any Bankruptcy Laws affecting creditors' rights generally;
(7) Holders of such Securities will have a valid, perfected
and unavoidable first-priority security interest in the trust funds;
and
(8) The Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (who may be outside counsel to
the Company, but not in-house counsel to the Company or any of its
Subsidiaries), each in form and substance satisfactory to the Trustee,
stating that all conditions precedent specified herein relating to the
defeasance contemplated by this Section 9.1 have been complied with.
In the event all or any portion of such Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
In the event that the Company takes the necessary action to comply
with the provisions described in this Section 9.1 and such Securities are
declared due and payable because of the occurrence of an Event of Default, the
Company will remain liable for all amounts due on such Securities at the time of
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acceleration resulting from such Event of Default in excess of the amount of
money and U.S. Government Obligations deposited with the Trustee pursuant to
this Section 9.1 at the time of such acceleration.
Section 9.2. Termination of Obligations Upon
Cancellation of the Securities.
--------------------------------
In addition to the Company's rights under Section 9.1, the Company and
the Guarantor may terminate all of their respective obligations under this
Indenture (subject to Section 9.3) when:
(1) all Securities (other than in respect of the Amended Original
Guaranty) theretofore authenticated and delivered (other than Securities which
have been destroyed, lost or stolen and which have been replaced or paid as
provided in Section 2.7) have been delivered to the Trustee for cancellation;
(2) the Company or a Guarantor has paid or caused to be paid all
sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (who may be outside counsel to the
Company, but not in-house counsel to the Company or any of its Subsidiaries),
each stating that all conditions precedent specified herein relating to the
satisfaction and discharge of this Indenture have been complied with and that
such satisfaction and discharge will not result in a breach or violation of, or
constitute a Default under, this Indenture or any other instrument to which the
Company, the Guarantor or any of their Subsidiaries is a party or by which it or
their Property is bound.
Section 9.3. Survival of Certain Obligations.
-------------------------------
Notwithstanding the termination of this Indenture and of the
Securities referred to in Sections 9.1 or 9.2, the respective obligations of the
Company, each Guarantor and the Trustee under Sections 2.2, 2.3, 2.4, 2.5, 2.6,
2.7, 2.11, 2.12, Article III, Article IV, 5.1, 5.2, 5.4, 5.6, 7.7, 7.8, 8.7,
8.8, 9.5, 9.6, 9.7, 13.1 (in respect of the Original Guarantor and Amended
Original Guaranty Obligations only), 14.1, 14.2, 14.4, 14.5, 14.7, 14.8, 14.11
and this Section 9.3 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 7.8, 8.7, 8.8, 9.5, 9.6, 9.7, 13.1 (in respect of the Original
Guarantor and Amended Original Guaranty Obligations only), 14.11
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and this Section 9.3 shall survive. Nothing contained in this Article IX shall
abrogate any of the obligations or duties of the Trustee under this Indenture.
Section 9.4. Acknowledgment of Discharge by Trustee.
--------------------------------------
After (i) the conditions of Sections 9.1 or 9.2 have been satisfied,
(ii) the Company or the Guarantor has paid or caused to be paid all other sums
payable hereunder by the Company and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent referred to in clause (i), above, relating to the
satisfaction and discharge of this Indenture have been complied with, the
Trustee upon request shall acknowledge in writing the discharge of the Company's
and the Guarantor' obligations under this Indenture except for those surviving
obligations specified in Section 9.3.
Section 9.5. Application of Trust Assets.
---------------------------
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it in the irrevocable trust established pursuant to
Section 9.1. The Trustee shall apply the deposited U.S. Legal Tender or U.S.
Government Obligations, together with earnings thereon, through the Paying Agent
(which may not for purposes of Article IX be the Company or any Affiliate of the
Company), in accordance with this Indenture and the terms of the Securities, to
the payment of principal of and interest on the Securities.
Section 9.6. Repayment to the Company.
------------------------
Upon termination of the trust established pursuant to Section 9.1 by
payment of the trust property to the Holders, the Trustee and the Paying Agent
shall promptly pay to the Company upon request any excess U.S. Legal Tender or
U.S. Government Obligations held by them.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to Section 9.1, any U.S. Legal Tender or U.S. Government
Obligations held by them for the payment of principal of or interest on the
Securities that remain unclaimed for two years after the date on which such
payment shall have become due; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may, at the
expense of the Company, cause to be published once, in a newspaper customarily
published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains
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unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such money
then remaining shall be repaid to the Company. After payment to the Company,
Holders entitled to such payment must look to the Company for such payment as
general creditors unless an applicable abandoned property law designates another
person.
Section 9.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 9.1 or 9.2 by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 9.1 or 9.2 until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Section 9.1 or 9.2; provided, however, that if the Company or
the Guarantor has made any payment of principal of, premium, if any, or interest
on any Securities because of the reinstatement of its obligations, the Company
or the Guarantor shall be subrogated to the rights of the Holders of such
Securities to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE X.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company or any Guarantor, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, or may amend,
modify or supplement the Mortgage, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to cure any ambiguity, defect, or
inconsistency, or to make any other provisions with respect to
matters or questions arising under this Indenture which shall not
be inconsistent with the provisions of this Indenture, provided
such action pursuant to this clause (1) shall not adversely
affect the interests of any Holder in any respect;
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(2) to add to the covenants of the Company for the
benefit of the Holders, or to surrender any right or power herein
conferred upon the Company or to make any other change that does
not adversely affect the rights of any Holders provided, that the
Company has delivered to the Trustee an Opinion of Counsel
stating that such change does not adversely affect the rights of
any Holder;
(3) to provide for additional collateral for, or
additional Guarantors of the Securities;
(4) to provide for uncertificated Securities in
addition to or in place of certificated Securities in compliance
with this Indenture;
(5) to evidence the succession of another person
to the Company, and the assumption by any such successor of the
obligations of the Company, herein and in the Securities in
accordance with Article VI; or
(6) to comply with the TIA.
Any such amendment or supplement may be limited in application to the Securities
(other than in respect of the Amended Original Guaranty) or to the Securities
(only in respect of the Amended Original Guaranty).
Section 10.2. Amendments, Supplemental Indentures and
Waivers with Consent of Holders.
------------------------------------------
Subject to Section 7.8 and the last sentence of this paragraph, with
the consent of the Advisory Committee (or, at any time as the Advisory Committee
does not exist or so as to comply with Section 10.3 hereof, with the consent of
the Holders of a majority in aggregate principal amount of then outstanding
Securities) by written act of the Advisory Committee (or said Holders, as the
case may be) delivered to the Company and the Trustee, the Company and each
Guarantor, when authorized by Board Resolutions, and the Trustee may amend or
supplement this Indenture, the Mortgage or the Securities or enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture, the Mortgage or the Securities or of modifying in any manner the
rights of the Holders under this Indenture, the Mortgage or the Securities.
Subject to Section 7.8 and the last sentence of this paragraph, the Advisory
Committee (or, at any time as the Advisory Committee does not exist or so as to
comply with Section 10.3 hereof, the Holder or Holders of a majority in
aggregate principal amount of then outstanding Securities) may waive compliance
by the Company
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or any Guarantor with any provision of this Indenture, the Mortgage or the
Securities. Notwithstanding the foregoing provisions of this Section 10.2, no
such amendment, supplemental indenture or waiver shall, without the consent of
the Advisory Committee (or at any time as the Advisory Committee does not exist
or so as to comply with Section 10.3 hereof Holders of at least 66 2/3% of the
aggregate principal amount of outstanding Securities) change any provision of
Article IV or Article XIII, or (except for the Stated Maturity, which is
governed by clause (4) (below) extend any Maturity Date of any Securities, and
no such amendment, supplemental indenture or waiver shall, without the consent
of the Holder of each outstanding Security affected thereby:
(1) change the percentage of principal amount of
Securities whose Holders must consent to an amendment, supplement
or waiver of any provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment
of interest on any Security;
(3) reduce the principal amount of any Security;
(4) change the Stated Maturity of any Security;
(5) alter the redemption provisions of Article III
in a manner adverse to any Holder;
(6) make any changes in the provisions concerning
waivers of Defaults or Events of Default by Holders of the
Securities or the rights of Holders to recover the principal or
premium of, interest on, or redemption payment with respect to,
any Security;
(7) make any changes in Section 7.4, 7.7 or this
third sentence of this Section 10.2;
(8) make the principal of, or the interest on, any
Security payable with anything or in any manner other than as
provided for in this Indenture and the Securities as in effect on
the date hereof; or
(9) make the Securities subordinated in right of
payment to any extent or under any circumstances to any other
indebtedness.
It shall not be necessary for the consent of the Advisory Committee or
the Holders under this Section to approve
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the particular form of any proposed amendment, supplement or waiver, but it
shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
After an amendment, supplement or waiver under this Section 10.2 or
10.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article X, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
Section 10.3. Compliance with TIA.
--------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
Section 10.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of his Security by written notice to the
Company or the person designated by the Company as the person to whom consents
should be sent if such revocation is received by the Company or such person
before the date on which the Trustee receives an Officers' Certificate
certifying that the Holders of the requisite principal amount of Securities have
consented (and not theretofore revoked such consent) to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those persons who were Holders at such record date,
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and only those persons (or their duly designated proxies), shall be entitled to
revoke any consent previously given, whether or not such persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 10.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided, however, that any
such waiver shall not impair or affect the right of any Holder to receive
payment of principal and premium and interest on a Security, on or after the
respective dates set for such amounts to become due and payable expressed in
such Security, or to bring suit for the enforcement of any such payment on or
after such respective dates.
Section 10.5. Notation on or Exchange of Securities.
--------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue, the
Guarantor shall endorse and the Trustee shall authenticate a new Security that
reflects the changed terms. Any failure to make the appropriate notation or to
issue a new Security shall not affect the validity of such amendment, supplement
or waiver.
Section 10.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article X, provided, that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article X is authorized or
permitted by this Indenture.
ARTICLE XI.
MEETINGS OF SECURITYHOLDERS
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Section 11.1. Purposes for Which Meetings May Be Called.
-----------------------------------------
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article XI for any of the following
purposes:
(a) to give any notice to the Company, the Guarantor or to the
Trustee, or to give any directions to the Trustee, or to waive or to consent to
the waiving of any Default or Event of Default hereunder and its consequences,
or to take any other action authorized to be taken by Securityholders pursuant
to any of the provisions of Article VII;
(b) to remove the Trustee or appoint a successor Trustee pursuant to
the provisions of Article VIII;
(c) to consent to a waiver pursuant to the provisions of Section 10.2;
or
(d) to take any other action (i) authorized to be taken by or on
behalf of the Holder or Holders of any specified aggregate principal amount of
the Securities under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
Section 11.2. Manner of Calling Meetings.
--------------------------
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 11.1, to be held at such time and at such place
in The City of New York, State of New York or elsewhere as the Trustee shall
determine. Notice of every meeting of Securityholders, setting forth the time
and place of such meeting and in general terms the action proposed to be taken
at such meeting, shall be mailed by the Trustee, first-class postage prepaid, to
the Company, the Guarantor and to the Holders at their last addresses as they
shall appear on the registration books of the Registrar, not less than 10 nor
more than 60 days prior to the date fixed for a meeting. The Company shall pay
the costs and expenses of preparing and mailing such notice.
Any meeting of Securityholders shall be valid without notice if the
Holders of all Securities then outstanding are present in person or by proxy, or
if notice is waived before or after the meeting by the Holders of all Securities
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 11.3. Call of Meetings by Company or Holders.
--------------------------------------
In case at any time the Company, pursuant to a Board Resolution, or the
Holders of not less than 10% in aggregate
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principal amount of the Securities then outstanding, shall have requested the
Trustee to call a meeting of Securityholders to take any action specified in
Section 11.1, by written request setting forth in reasonable detail the action
proposed to be taken at the meeting, and the Trustee shall not have mailed the
notice of such meeting within 20 days after receipt of such request, then the
Company or the Holders of Securities in the amount above specified may determine
the time and place in The City of New York, State of New York or elsewhere for
such meeting and may call such meeting for the purpose of taking such action, by
mailing or causing to be mailed notice thereof as provided in Section 11.2, or
by causing notice thereof to be published at least once in each of two
successive calendar weeks (on any Business Day during such week) in a newspaper
or newspapers printed in the English language, customarily published at least
five days a week of a general circulation in The City of New York, State of New
York, the first such publication to be not less than 10 nor more than 60 days
prior to the date fixed for the meeting.
Section 11.4. Who May Attend and Vote at Meetings.
-----------------------------------
To be entitled to vote at any meeting of Securityholders, a person
shall (a) be a registered Holder of one or more Securities, or (b) be a person
appointed by an instrument in writing as proxy for the registered Holder or
Holders of Securities. The only persons who shall be entitled to be present or
to speak at any meeting of Securityholders shall be the persons entitled to vote
at such meeting and their counsel and any representatives of the Trustee and its
counsel and any representatives of the Company, the Guarantor and their counsel.
Section 11.5. Regulations May Be Made by Trustee; Conduct
of the Meeting; Voting Rights; Adjournment.
-----------------------------------------------
Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any action by
or any meeting of Securityholders, in regard to proof of the holding of
Securities and of the appointment of proxies, and in regard to the appointment
and duties of inspectors of votes, and submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think appropriate. Such
regulations may fix a record date and time for determining the Holders of record
of Securities entitled to vote at such meeting, in which case those and only
those persons who are Holders of Securities at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
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The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 11.3, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall in
like manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by vote of the holders of a majority
in principal amount of the Securities represented at the meeting and entitled to
vote.
At any meeting each Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him;
provided, however, that no vote shall be cast or counted at any meeting in
respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not then outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Securities held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Securityholders. Any meeting of Securityholders duly called
pursuant to the provisions of Section 11.2 or Section 11.3 may be adjourned from
time to time by vote of the Holder or Holders of a majority in aggregate
principal amount of the Securities represented at the meeting and entitled to
vote, and the meeting may be held as so adjourned without further notice.
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Section 11.6. Voting at the Meeting and Record to Be Kept.
-------------------------------------------
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amount of the Securities voted by the ballot. The permanent
chairman of the meeting shall appoint two inspectors of votes, who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more persons having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that such notice was mailed as
provided in Section 11.2 or published as provided in Section 11.3. The record
shall be signed and verified by the affidavits of the permanent chairman and the
secretary of the meeting and one of the duplicates shall be delivered to the
Company and the other to the Trustee to be preserved by the Trustee, the latter
to have attached thereto the ballots voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 11.7. Exercise of Rights of Trustee or Securityholders
May Not Be Hindered or Delayed by Call of Meeting.
--------------------------------------------------
Nothing contained in this Article XI shall be deemed or construed to
authorize or permit, by reason of any call of a meeting of Securityholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Securityholders under any of the provisions of
this Indenture or of the Securities.
ARTICLE XII.
INDEMNIFICATION AND EXPENSE REIMBURSEMENT
OF ADVISORY COMMITTEE
Section 12.1. Indemnity; Expenses.
-------------------
The Company shall indemnify the members of the Advisory Committee, and
hold them harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the member's
agents and counsel),
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loss or liability incurred by them without negligence or bad faith on their
part, arising out of or in connection with their rights or duties hereunder
including the reasonable costs and expenses of defending themselves against any
claim or liability in connection with the exercise or performance of any of
their powers or duties hereunder. A member of the Advisory Committee shall
notify the Company promptly of any claim asserted against such member for which
it may seek indemnity. The Company shall defend the claim and the member shall
provide reasonable cooperation at the Company's expense in the defense. The
member may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel; provided, that the Company will not be required to
pay such fees and expenses if it assumes the member's defense and there is no
conflict of interest between the Company and the member in connection with such
defense. The Company need not pay for any settlement made without its written
consent. The Company need not reimburse any expense or indemnify against any
loss or liability to the extent incurred by the member through his or her gross
negligence, bad faith or willful misconduct.
The Company shall reimburse the members of the Advisory Committee for
their reasonable out of pocket expenses; provided that such reimbursement shall
not include the fees and expenses of professionals, except for reasonable fees
and expenses of professionals incurred in connection with the Company's requests
for Advisory Committee approvals pursuant to the terms of this Section 12.1 and
in Section 5.20 of this Indenture.
To secure the Company's payment obligations in this Section 12.1,
members of the Advisory Committee shall have a lien prior to the Securities but
subordinate to the lien of the Trustee on all assets held or collected by the
Trustee, in its capacity as Trustee, except assets held in trust to pay
principal and premium, if any, of or interest on particular Securities.
The Company's obligations under this Section 12.1 and any lien arising
hereunder shall survive the resignation or removal of a member of the Advisory
Committee, the discharge of the Company's obligations pursuant to Article IX of
this Indenture and any rejection or termination of this Indenture under any
Bankruptcy Law.
ARTICLE XIII.
GUARANTIES
Section 13.1. Amended Original Guaranty.
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(a) The Mortgage shall not secure any of the Amended Original
Guaranty Obligations.
(b) In consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Original Guarantor hereby
irrevocably and unconditionally guarantees (the "Amended Original Guaranty") to
each Holder of Securities authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity and
enforceability of this Indenture, the Securities, the Indenture Obligations, the
Amended Original Guaranty or the Amended Original Guaranty Obligations, that the
principal and premium (if any) of and interest on the Original Securities will
be paid in full when due, whether at the maturity or interest payment date, by
acceleration, call for redemption or otherwise.
(c) The Original Guarantor hereby agrees that its obligations with
regard to the Amended Original Guaranty shall be unconditional, irrespective of
the validity, regularity or enforceability of the Original Securities, this
Indenture or the Original Indenture, the absence of any action to enforce the
same, any delays in obtaining or realizing upon or failures to obtain or realize
upon collateral, the recovery of any judgment against the Company, any action to
enforce the same or any other circumstances that might otherwise constitute a
legal or equitable discharge or defense of the Original Guarantor. The Original
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company or right to require the
prior disposition of the assets of the Company to meet its obligations, protest,
notice and all demands whatsoever and covenants that the Amended Original
Guaranty will not be discharged except by complete performance of the
obligations contained in the Original Securities and the Original Indenture.
(d) If any Holder or the Trustee is required by any court or
otherwise to return to either the Company or any Guarantor, or any Custodian,
Trustee, or similar official acting in relation to either the Company or the
Original Guarantor, any amount (in respect of the Original Securities) paid by
either the Original Guarantor to the Trustee or such Holder, in respect of this
Amended Original Guaranty, this Amended Original Guaranty, to the extent
theretofore discharged, shall be reinstated in full force and effect. The
Original Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any Amended Original
Guaranty Obligation.
(e) It is the intention of the Original Guarantor that the
obligations of the Original Guarantor hereunder shall be in, but not in excess
of, the maximum amount permitted by applicable law. Accordingly, if the Amended
Original Obligations would be annulled, avoided or subordinated to the creditors
of the Original Guarantor by a court of competent jurisdiction in a proceeding
actually pending before such court as a result of a determination both that the
Amended Original Guaranty was made without fair consideration and, immediately
after giving effect thereto, the Original Guarantor was insolvent or unable to
pay its debts as they mature or left with an unreasonably small capital, then
the obligations of the Original Guarantor under the Amended Original Guaranty
shall be reduced by such court if such reduction would
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result in the avoidance of such annulment, avoidance or subordination; provided,
however, that any reduction pursuant to this paragraph shall be made in the
smallest amount as is strictly necessary to reach such result. For purposes of
this paragraph, "fair consideration", "insolvency", "unable to pay its debts as
they mature", "unreasonably small capital" and the effective times of
reductions, if any, required by this paragraph shall be determined in accordance
with applicable law.
Section 13.2. Guaranty.
(a) In consideration of good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, each Guarantor hereby
irrevocably and unconditionally guarantees (the "Guaranty") to each Holder of a
Security (other than in respect of the Amended Original Guaranty) authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company under this Indenture or the
Securities, that: (w) the principal and premium (if any) of and interest on the
Securities (other than in respect of the Amended Original Guaranty) will be paid
in full when due, whether at the maturity or interest payment date, by
acceleration, call for redemption, Offer to Purchase or otherwise; (x) all other
obligations of the Company to the Holders or the Trustee under this Indenture or
the Securities (other than in respect of the amended Original Guaranty) will be
promptly paid in full or performed, all in accordance with the terms of this
Indenture and the Securities (other than in respect of the Amended Original
Guaranty); and (y) in case of any extension of time of payment or renewal of any
Securities (other than in respect of the Amended Original Guaranty) or any of
such other obligations, they will be paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at maturity, by
acceleration, call for redemption, upon Offer to Purchase or otherwise. Failing
payment when due of any amount so guaranteed for whatever reason, each Guarantor
shall be obligated to pay the same before failure so to pay becomes an Event of
Default.
(b) Each Guarantor hereby agrees that its obligations with regard to
this Guaranty shall be unconditional, irrespective of the validity, regularity
or enforceability of the Securities or this Indenture, the absence of any action
to enforce the same, any delays in obtaining or realizing upon or failures to
obtain or realize upon collateral, the recovery of any judgment against the
Company or any other Guarantor, any action to enforce the same or any other
circumstances that might otherwise constitute a legal or equitable discharge or
defense of such Guarantor. Each Guarantor hereby waives diligence, presentment,
demand of payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first against the
Company or right to require the prior disposition of the assets of the Company
to meet its obligations, protest, notice and all demands whatsoever and
covenants that this Guaranty will not be discharged except by complete
performance of the obligations contained in the Securities (other than in
respect of the Amended Original Guaranty) and this Indenture (other than in
respect of the Amended Original Guaranty).
(c) If any Holder or the Trustee is required by any court or otherwise
to return to either the Company or any Guarantor, or any Custodian, Trustee, or
similar official acting in
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relation to either the Company or such Guarantor, any amount paid by either the
Company or any Guarantor to the Trustee or such Holder, this Guaranty, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it will not be entitled to any right of subrogation
in relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees that, as between such Guarantor, on the one hand, and the Holders and the
Trustee, on the other hand, (i) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Section 7.2 for the purposes of this
Guaranty, notwithstanding any stay, injunction or other prohibition preventing
such acceleration as to the Company of the obligations guaranteed hereby, and
(ii) in the event of any declaration of acceleration of those obligations as
provided in Section 7.2, those obligations (whether or not due and payable) will
forthwith become due and payable by the Guarantor for the purpose of this
Guaranty.
(d) It is the intention of each Guarantor and the Company that the
obligations of such Guarantor hereunder shall be in, but not in excess of, the
maximum amount permitted by applicable law. Accordingly, if the obligations in
respect of the Guaranty would be annulled, avoided or subordinated to the
creditors of any Guarantor by a court of competent jurisdiction in a proceeding
actually pending before such court as a result of a determination both that the
Guaranty was made without fair consideration and, immediately after giving
effect thereto, such Guarantor was insolvent or unable to pay its debts as they
mature or left with an unreasonably small capital, then the obligations of such
Guarantor under the Guaranty shall be reduced by such court if such reduction
would result in the avoidance of such annulment, avoidance or subordination;
provided, however, that any reduction pursuant to this paragraph shall be made
in the smallest amount as is strictly necessary to reach such result. For
purposes of this paragraph, "fair consideration", "insolvency", "unable to pay
its debts as they mature", "unreasonably small capital" and the effective times
of reductions, if any, required by this paragraph shall be determined in
accordance with applicable law.
Section 13.3. Execution and Delivery of Guaranty.
To evidence its Guaranty set forth in Section 13.2, each Guarantor
agrees that a notation of the Guaranty substantially in the form annexed hereto
as Exhibit B shall be endorsed on each Security authenticated and delivered by
the Trustee and that this Indenture shall be executed on behalf of the Guarantor
by two Officers or an Officer and an Assistant Secretary by manual or facsimile
signature.
Each Guarantor agrees that its Guaranty set forth in Section 13.2
shall remain in full force and effect and apply to all the Securities
notwithstanding any failure to endorse on each Security a notation of such
Guaranty.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security on which a Guaranty is
endorsed, the Guaranty shall be valid nevertheless.
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The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery that the Guaranty set forth in
this Indenture on behalf of each Guarantor.
Section 13.4. Future Guarantors.
------------------
The Company and each Guarantor covenant and agree that they shall
cause each person (other than CDGC and its Subsidiaries) that is or becomes a
Subsidiary of the Company or any Guarantor to execute a Guaranty in the form of
Exhibit B hereto and will and cause such Subsidiary to execute an Indenture
supplemental hereto for the purpose of adding such Subsidiary as a Guarantor
hereunder and the capital stock of such Subsidiary owned by the Company or any
Subsidiary of the Company shall be pledged, pursuant to an agreement
substantially in form of the Pledge Agreement attached hereto as Exhibit C in
favor of the Trustee for the benefit of the Holders.
Section 13.5. Certain Bankruptcy Events.
-------------------------
Each Guarantor hereby covenants and agrees that in the event of the
insolvency, bankruptcy, dissolution, liquidation or reorganization of the
Company, such Guarantor shall not file (or join in any filing of), or otherwise
seek to participate in the filing of, any motion or request seeking to stay or
to prohibit (even temporarily) execution on the Guaranty and hereby waives and
agrees not to take the benefit of any such stay of execution, whether under
Section 362 or 105 of the United States Bankruptcy Code or otherwise.
ARTICLE XIV.
MISCELLANEOUS
Section 14.1. TIA Controls.
--------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
Section 14.2. Notices.
-------
Any notices or other communications to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
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If to the Company or the Guarantor:
Capital Gaming International, Inc.
Bayport One, Suite 250, 8025 Black Horse Pike
West Atlantic City, New Jersey 08232
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Barry N. Seidel, Esq. and
Laurence D. Weltman, Esq.
if to the Trustee:
First Trust National Association
180 East 5th Street
St. Paul, Minnesota 55101
Attention: Corporate Finance
The Company, the Guarantor and the Trustee by notice to each other
party may designate additional or different addresses as shall be furnished in
writing by such party. Any notice or communication to the Company, the Guarantor
or the Trustee shall be deemed to have been given or made as of the date so
delivered, if personally delivered; when answered back, if telexed, when receipt
is acknowledged, if telecopied; and 5 Business Days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change of
address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Securityholder shall be
mailed to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
Section 14.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the
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Guarantor, the Trustee, the Registrar and any other person shall have the
protection of TIA Section 312(c).
Section 14.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance
reasonably satisfactory to the Trustee) stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 14.5. Statements Required in Certificate or Opinion.
----------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such ` person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on an Officers' Certificate or certificates of public
officials.
Section 14.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
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The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
Section 14.7. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions in New York, New
York are not required to be open. If a payment date is a Legal Holiday in New
York, New York, payment may be made at such place on the next succeeding day
that is not a Legal Holiday, and no interest shall accrue for the intervening
period.
Section 14.8. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. THE COMPANY AND THE GUARANTOR HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN
THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY,
JURISDICTION OF THE AFORESAID COURTS. THE COMPANY AND THE GUARANTOR IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE TRUSTEE OR ANY SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION.
Section 14.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of any of the Company, the Guarantor or any of their
Subsidiaries. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 14.10. No Recourse against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company or the Guarantor shall not
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have any liability for any obligations of the Company or the Guarantor under the
Securities or this Indenture or for any claim based on, in respect of or by
reason of such obligations or their reactions. Each Securityholder by accepting
a Security waives and releases all such liability. Such waiver and release are
part of the consideration for the issuance of the Securities.
Section 14.11. Successors.
----------
All agreements of the Company and the Guarantor in this Indenture and
the Securities shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
Section 14.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
Section 14.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
Section 14.14. Table of Contents, Headings, Etc.
--------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURE
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
CAPITAL GAMING INTERNATIONAL, INC.
By: ________________________________
Name:
Title:
Attest: ___________________
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By: ______________________________,
Name:
Title:
Attest: ____________________
CAPITAL GAMING MANAGEMENT, INC.
By: ______________________________,
Name:
Title:
Attest: ____________________
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Exhibit A
[FORM OF SECURITY]
CAPITAL GAMING INTERNATIONAL, INC.
12.0% SENIOR SECURED NOTES DUE 2001
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED, EXCEPT PURSUANT TO (i)
A REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH ACT, or (iii) ANY OTHER
EXEMPTION FROM REGISTRATION UNDER SUCH ACT RELATING TO THE DISPOSITION OF
SECURITIES, AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE LAWS OF ANY STATE
OF THE UNITED STATES. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE
WITH APPLICABLE GAMING LAWS AND REGULATIONS.
No. ______ $___________
Capital Gaming International, Inc., a New Jersey corporation
(hereinafter called the "Company," which term includes any successor corporation
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to, or registered assigns, the principal sum of Dollars, on 4
years from the Issue Date.
Interest Payment Dates: May 15 and November 15 of each year commencing
November 15, 1997
Record Dates: May 1 and November 1
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
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IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated: ____________, 1997
CAPITAL GAMING INTERNATIONAL, INC.
By: _______________________________
Attest:
- ----------------------------
Secretary
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
FIRST TRUST NATIONAL ASSOCIATION
as Trustee
By:
------------------------------
Authorized Signatory
Dated:
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CAPITAL GAMING INTERNATIONAL, INC.
12.0% Senior Secured Notes Due 2001
1. Interest
--------
Capital Gaming International, Inc., a New Jersey corporation (the
"Company"), promises to pay interest from the Issue Date on the principal amount
of this Security at a rate of 12.0% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at a rate of 12.0% per annum compounded semi-annually.
The Company will pay interest semi-annually on May 15 and November 15
of each year (each, an "Interest Payment Date"), commencing November 15, 1997.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the Issue Date.
Interest will be computed on the basis of a 360-day year consisting of twelve 30
day months.
2. Method of Payment.
-----------------
The Company shall pay principal of and interest on the Securities
(except defaulted interest) to the persons who are the registered Holders at the
close of business on the Record Date immediately preceding the Interest Payment
Date. Except as provided below, the Company shall pay principal and interest in
such coin or currency of the United States of America as at the time of payment
shall be legal tender for payment of public and private debts ("U.S. Legal
Tender"). However, the Company may pay principal and interest by wire transfer
of Federal funds, or interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to a Holder at the Holder's
registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, First Trust National Association (the "Trustee") will act
as Paying Agent and Registrar. The Company may change any Paying Agent,
Registrar or co-Registrar without notice to the Holders. The Company or any of
its Subsidiaries may, subject to certain exceptions, act as Paying Agent,
Registrar or co-Registrar.
4. Indenture
---------
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The Company issued the Securities under an Amended and Restated
Indenture, dated March 27, 1997 (the "Indenture"), between the Company and the
Trustee. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act, as in effect on the date of the Indenture. The Securities are
subject to all such terms, and Holders of Securities are referred to the
Indenture and said Act for a statement of them. The Securities are senior
obligations of the Company limited in aggregate principal amount to $23,100,000.
5. Redemption.
----------
The Securities are redeemable in whole or from time to time in part at
any time on and after the Issue Date at the option of the Company, at the
Redemption Price of 100% of principal amount), together with any accrued but
unpaid interest to the Redemption Date. Except as provided in paragraphs 6 and 7
below, the Securities may not otherwise be redeemed.
6. Mandatory Redemption.
--------------------
The Company shall redeem $4,620,000 and $18,480,000 of the aggregate
principal amount of the Securities issued on the third anniversary of the Issue
Date and the fourth anniversary of the Issue Date, respectively, at a redemption
price equal to 100% of the principal amount thereof together with accrued and
unpaid interest to the redemption date.
7. Redemption Pursuant to Gaming Laws.
----------------------------------
The Securities may also be redeemed at any time pursuant to, and in
accordance with, any order of any Gaming Authority with appropriate jurisdiction
and authority relating to a Gaming License, or to the extent necessary in the
reasonable, good faith judgment of the Board of Directors of the Company to
prevent the loss, failure to obtain or material impairment or to secure the
reinstatement, of any material Gaming License, where in any such case such
redemption or acquisition is required because such Holder or beneficial owner of
such Security is required to be found suitable or to otherwise qualify under any
gaming laws and is not found suitable or so qualified within a reasonable period
of time.
Any redemption of the Securities shall comply with Article III of the
Indenture.
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8. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first class mail at least 30
days but not more than 45 days before the Redemption Date to each Holder of
Securities to be redeemed at his registered address. Securities in denominations
larger than $100 may be redeemed in part.
Except as set forth in the Indenture, from and after any Redemption
Date, if monies for the redemption of the Securities called for redemption shall
have been deposited with the Paying Agent on such Redemption Date, the
Securities called for redemption will cease to bear interest and the only right
of the Holders of such Securities will be to receive payment of the Redemption
Price, including any accrued and unpaid interest to the Redemption Date.
9. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $100 and integral multiples of $100. A Holder may register the
transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption.
10. Persons Deemed Owners.
---------------------
The Registered Holder of a Security may be treated as the owner of it
for all purposes.
11. Unclaimed Money.
---------------
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company at its written request. After that, all liability of the Trustee and
such Paying Agent(s) with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity.
-----------------------------------------
If the Company at any time deposits into an irrevocable trust with the
Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the
principal of and interest on the Securities to redemption or maturity and
complies with the other provisions of the Indenture relating thereto, the
Company will be discharged from certain provisions of the Indenture and the
Securities (including the financial covenants, but excluding
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its obligation to pay the principal of and interest on the Securities).
13. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the consent of the Advisory Committee or, at any
time as the Advisory Committee does not exist or so as to comply with Section
10.3 of the Indenture, with the written consent of the Holder or Holders of a
majority, and in certain cases at least two-thirds, in aggregate principal
amount of the Securities then outstanding, and any existing Default or Event of
Default or compliance with any provision may be waived with the consent of the
Advisory Committee or, at any time as the Advisory Committee does not exist or
so as to comply with Section 10.3 of the Indenture, the Holder or Holders of a
majority in aggregate principal amount of the Securities then outstanding.
Without notice to or consent of any Holder, the parties thereto may amend or
supplement the Indenture or the Securities to, among other things, cure any
ambiguity, defect or inconsistency, or make any other change that does not
adversely affect the rights of any Holder of a Security.
14. Restrictive Covenants.
---------------------
The Indenture imposes certain limitations on the ability of the
Company and its Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, make payments in respect of its
Capital Stock, enter into transactions with Affiliates, incur Liens, sell
assets, merge or consolidate with any other person and sell, lease, transfer or
otherwise dispose of substantially all of its properties or assets. The
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
15. Security.
--------
In order to secure the obligations under the Indenture, the Company,
each Guarantor and the Trustee have entered into certain security agreements in
order to create security interests in and liens upon certain assets and
properties of the Company and each Guarantor.
16. Sale of Assets.
--------------
The Indenture imposes certain limitations on the ability of the
Company or its Subsidiaries to sell assets. In the event the proceeds from a
permitted Asset Sale exceed certain amounts, as specified in the Indenture, the
Company will be
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required either to reinvest the proceeds of such Asset Sale in its business or
to make an offer to purchase each Holder's Securities at 100% of the principal
amount thereof, together with accrued interest, if any, to the purchase date.
17. Successors.
----------
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
18. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture or the Securities except as provided in the
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture of the Securities. Subject to certain limitations,
Holders of a majority in aggregate principal amount of the Securities then
outstanding may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders of Securities notice of any continuing Default
or Event of Default (except a Default in payment of principal or interest), if
it determines that withholding notice is in their interest.
19. Trustee Dealings with Company.
-----------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company or its Affiliates, and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
20. No Recourse Against Others.
--------------------------
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company under the Securities or the
Indenture. Each Holder of a Security by accepting a Security waives and releases
all such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
21. Authentication.
--------------
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This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
22. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not, as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
23. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
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[FORM OF ASSIGNMENT]
I or we assign this Security to
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_________ and irrevocably appoint ________ agent to transfer this Security on
the books of the Company. The agent may substitute another to act for him.
Date: __________ Signed: ______________________________________
- ------------------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Security)
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to any of the following provisions of the Indenture, check the
appropriate box:
[__] Section 5.14;
[__] Article XII.
If you want to elect to have only part of this Security purchased by
the Company pursuant to the Indenture, state the principal amount you want to be
purchased: $__________________
Date:______________ Signature:____________________________________
(Sign exactly as your name appears on the other side of this Security)
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Exhibit B
[FORM OF GUARANTY]
For value received, ______________, a __________ corporation,
hereby unconditionally guarantees to the Holder of the Security upon which this
Guaranty is endorsed the due and punctual payment, as set forth in the Indenture
pursuant to which such Security and this Guaranty were issued, of the principal
of, premium (if any) and interest on such Security when and as the same shall
become due and payable for any reason according to the terms of such Security
and Article XIII of the Indenture. The Guaranty of the Security upon which this
Guaranty is endorsed will not become effective until the Trustee signs the
certificate of authentication on such Security.
________________________________
By: ____________________________
Attest: ________________________
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Exhibit C
[FORM OF PLEDGE AGREEMENT]
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CAPITAL GAMING INTERNATIONAL, INC.
Exhibit "B" To Plan Of Reorganization
Amended and Restated Certificate of Incorporation
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CAPITAL GAMING INTERNATIONAL, INC.
This is to certify there is hereby organized a corporation under
and by virtue of N.J.S. 14A:1-1 et seq., the "New Jersey Business Corporation
Act."
1. Name. The name of the Corporation is Capital Gaming
International, Inc.
2. Registered Agent and Registered Office. The name, address (and
zip code) of the Corporation's current registered agent and registered office
are:
William S. Papazian, Senior Vice President and
General Counsel
Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
W. Atlantic City, NJ 08232
3. Purpose. The purposes for which this Corporation is organized
are: to engage in any activity within the purposes for which corporations may be
organized under the New Jersey Business Corporation Act.
4. Capitalization. The aggregate number of shares which the
Corporation shall have authority to issue is three million, two hundred thousand
(3,200,000), without par value, of which three million, two hundred thousand
(3,200,000) shall be designated "Common Stock." The Board of Directors shall
have the authority to determine or change the designation, number of shares,
relative rights, preferences and limitations of any class of shares.
No nonvoting equity securities of the Corporation shall be
issued. This provision is included in this Amended and Restated Certificate of
Incorporation in compliance with Section 1123 of the United States Bankruptcy
Code, 11 U.S.C. Section 1123, and shall have no further force and effect beyond
that required by said section and for so long as said section is in effect and
applicable to the Corporation.
5. Board of Directors.
(a) The business and affairs of the Corporation shall be
managed and controlled by a Board of Directors consisting of
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not less than three (3) nor more than seven (7) persons. The exact number of
Directors within the minimum and maximum limitations specified in the preceding
sentence shall be fixed from time to time by the Board of Directors pursuant to
a resolution adopted by a majority of the entire Board of Directors.
The Board of Directors shall be divided into three (3) classes: Class
A, Class B and Class C (each a "Class"), with each Class as nearly equal in
number as possible. The initial Class A Director shall have a term of office to
expire at the third Annual Meeting of Shareholders following ______________,
1997 (the "Effective Date"), the effective date of the Corporation's Plan of
Reorganization, dated December 22, 1996 (the "Plan"). The initial Class B
Director shall have a term of office to expire at the second Annual Meeting of
Shareholders following the Effective Date. The initial Class C Director shall
have a term of office to expire at the first Annual Meeting of Shareholders
following the Effective Date. At each Annual Meeting of Shareholders following
such initial classification and election, Directors elected to succeed the Class
A, B and C Directors whose term expires shall be elected for a term of office to
expire at the third succeeding Annual Meeting of Shareholders after their
election.
(b) Any Director may be removed from office at any time, but only
for cause and only by the affirmative vote of (i) the holders of at least 66
2/3% of the voting power of all the shares of the Corporation entitled to vote
for the election of Directors, or (ii) a majority of the remaining Directors.
Any Director may also be suspended from active service by a majority vote of the
remaining Directors pending a final determination that cause exists for removal.
(c) Newly created directorships resulting from an increase in the
authorized number of Directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled by a majority vote of the Directors then in
office, although less than a quorum exists. Any Director so chosen to fill a
directorship created by an increase in the number of Directors shall become a
member of the Class whose term expires at the next Annual Meeting of
Shareholders; provided that if this would result in any Class having two more
Directors than any other Class, the new Director shall become a member of the
Class whose term expires at the next following Annual Meeting of Shareholders
which does not provide such result. Any Director so chosen to fill a vacancy
shall become a member of the Class of the replaced Director. Any vacancy or
newly created directorship not filled by the Board by the next succeeding Annual
or Special
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Meeting of Shareholders called for this purpose, may be filled by a vote of the
shareholders entitled to vote at such Meeting. No decrease in the number of
Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.
(d) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
66 2/3% of the voting power of all of the shares of the Corporation entitled to
vote for the election of Directors shall be required to amend, repeal or adopt
any provision inconsistent with this Article 5.
6. Current Board. The Board of Directors of the Corporation initially
consists of three (3) Directors and the designated Class and name and post
office address of each person who serves as such a Director is as follows:
NAME CLASS ADDRESS
Edward M. Tracy A Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
W. Atlantic City, NJ 08232
Col. Clinton L. Pagano B Capital Gaming International, Inc.
(retired) Bayport One, Suite 250
8025 Black Horse Pike
W. Atlantic City, NJ 08232
William S. Papazian C Capital Gaming International, Inc.
Bayport One, Suite 250
8025 Black Horse Pike
W. Atlantic City, NJ 08232
7. Limitation of Liability. Pursuant to the provisions of Section
14A:2-7(3) of the New Jersey Business Corporation Act, any director or officer
of the Corporation shall not be personally liable to the Corporation or its
shareholders for damages for breach of any duty owed to the Corporation or its
shareholders, except that this provision shall not relieve a director or officer
of Liability for any breach of duty based upon an act or omission (a) in breach
of such person's duty of loyalty to the Corporation or its shareholders; (b) not
in good faith, or involving a known violation of law; or (c) resulting in
receipt by such person of an improper personal benefit.
8. Indemnification.
---------------
(a) Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is
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involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, or if the Board otherwise determines that any
proceeding involving an officer, director, employee or agent could adversely
affect the Corporation or any License held by it, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the New Jersey
Business Corporation Act, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against all
expense, liability and loss (including attorneys fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this Section shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the New Jersey
Business Corporation Act requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which services were or are rendered by such person while a
director or officer, including, without limitation, service to any employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the
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foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the Corporation within
thirty (30) days after a written claim has been received by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim, and, if successful, in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the New Jersey Business Corporation Act
for the Corporation to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel,
or its shareholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he or she had met the applicable standard of conduct set forth in the
New Jersey Business Corporation Act, nor an actual determination by the
Corporation (including the Board of Directors, independent legal counsel, or its
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to an action, or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Section shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
shareholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the New Jersey Business Corporation Act.
9. Divestiture of Shares.
---------------------
(a) Notwithstanding any other provision of this
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Certificate, outstanding shares of Capital Stock or Stock Equivalents shall be
subject to divestiture by the holders thereof in the following instances:
(1) if any Gaming Authority orders, requires or
requests the Corporation or any Beneficial Owner of Capital Stock
or Stock Equivalents to take such action as is necessary for such
Beneficial Owner to divest any or all of such holder's Capital
Stock or Stock Equivalents (a "Divestiture Order"), the
Beneficial Owner or holder, after being provided written notice
of the Gaming Authority's determination, shall immediately
transfer the Capital Stock or Stock Equivalents into a
Liquidating Trust ("Trust") administered by an independent
trustee appointed by the Board of Directors of the Corporation
who shall, under the terms of the Trust, be required to sell or
otherwise transfer within a period of twelve months (or such
shorter time period as may be required by the Divestiture Order)
all of the Capital Stock or Stock Equivalents required to be
divested by the Divestiture Order;
(2) if any Gaming Authority determines that
continued beneficial ownership of the Corporation's Capital Stock
or Stock Equivalents by any Beneficial Owner of such securities
shall or may be grounds for the revocation, termination,
suspension, non-renewal, restriction or withholding of any
License granted to or applied for by the Corporation or any of
its Affiliates, or shall or may be grounds for terminating or
suspending any management, consulting or other material contract
of the Corporation or any of its Affiliates or otherwise limiting
the activities of the Corporation or any of its Affiliates (any
of the above a "License Event"), then the Beneficial Owner or
holder, after having been provided written notice of the
Authority's determination, shall immediately transfer the Capital
Stock or Stock Equivalents into a Trust administered by an
independent trustee appointed by the Board of Directors of the
Corporation who shall, under the terms of the Trust, be required
to sell or otherwise transfer within a period of twelve (12)
months (or such shorter period as may be required by the Gaming
Authority to prevent the occurrence of a License Event) all of
the Capital Stock or Stock Equivalents beneficially owned by such
Beneficial Owner.
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(3) if the Board of Directors, in its sole
discretion, shall determine that the continued beneficial
ownership of any Capital Stock or Stock Equivalents by any
Beneficial Owner thereof shall or may, or, when taken together
with the beneficial ownership of Capital Stock or Stock
Equivalents by any other Beneficial Owner thereof shall or may,
result in a License Event, then the Beneficial Owner or holder,
after having been provided written notice of the Board's
determination, shall immediately transfer the Capital Stock or
Stock Equivalents into a Trust administered by an independent
trustee appointed by the Board of Directors of the Corporation
who shall, under the terms of the Trust, be required to sell or
otherwise transfer within a period of twelve (12) months all of
the Capital Stock or Stock Equivalents beneficially owned by such
Beneficial Owner.
(4) If any Gaming Authority determines that the
continued beneficial ownership of the Corporation's Capital Stock
or Stock Equivalents by any Beneficial Owner of said securities
shall require the licensure, certification, approval or
background investigation of such Beneficial Owner, such
Beneficial Holder, after being provided written notice of such
requirement, shall immediately transfer the Capital Stock or
Stock Equivalents into a Trust administered by an independent
trustee appointed by the Board of Directors of the Corporation
who shall, under the terms of the Trust, be required to sell or
otherwise transfer within a period of twelve (12) months (or such
shorter period as may be required by the Gaming Authority to
prevent occurrence of a License Event) following the earlier to
occur of (x) failure of such Beneficial Owner to submit all
required information in connection with such requisite license,
certification, approval or background investigation to the Gaming
Authority and the Corporation within seven (7) days of notice of
such determination being sent to Beneficial Owner and (y) failure
of such Beneficial Holder to receive such requisite licensure,
certification, approval or background investigation clearance
within sixty (60) days following such notice.
(b) The Beneficial Owner's obligation to transfer Capital Stock
and Stock Equivalents to a Trust pursuant to 9(a)(1), (2), (3) or (4) above may
be specifically enforced in any proceeding commenced in any federal or state
court of competent jurisdiction and the Corporation shall be entitled to recover
its attorneys fees and costs incurred in connection with
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such proceeding, as well as any other fees and expenses incurred as a result of
the Beneficial Owner's failure to timely divest. This shall be in addition to
any other rights and remedies which the Corporation may have against such
Beneficial Owner. Failure of the Corporation to provide notice to a Beneficial
Owner after making reasonable efforts to do so shall not preclude the
Corporation from exercising its rights under this Article 9 and shall not be a
defense to any such action by Corporation.
(c) Any Trust established pursuant to Article 9(a)(1,), (2),
(3) or (4) above shall provide that, unless the prior written approval of the
Board of Directors is obtained, which may be granted or denied in their sole
discretion, the Trustee may only sell the Capital Stock or Stock Equivalents in
open market transactions.
(d) Notwithstanding the provisions of Article 9(a)(1), (2),
(3) or (4) above the Corporation may, simultaneously with the sending of
applicable notice to the Beneficial Owner as provided in such sections, as the
case may be, or at any time prior to the complete liquidation of any Trust
established thereunder, give notice of its intent to redeem from the Holders the
Capital Stock or Stock Equivalents (or such remaining portions which are owned
by the Trust) which are owned or held by such Beneficial Holder; and may
thereafter redeem such shares in accordance with subparagraph (e) below.
(e) Whenever the Corporation has the right to acquire shares
of Capital Stock or Stock Equivalents from the holder thereof pursuant to this
Article 9, the price of the shares to be purchased shall be equal to the lesser
of (i) 75% of the Fair Market Value of such shares, or (ii) 75% of the original
purchase price paid for such securities by the relevant shareholder, or such
other purchase price as may be required by pertinent state or Federal law
pursuant to which the purchase is required or made.
(1) If there is no other applicable legal
requirement, any amount payable to the shareholder by the
Corporation will be paid in three equal annual installments
pursuant to the Corporation's unsecured promissory note with
interest equal to the prime rate, as published from
time-to-time in the Wall Street Journal. The Note shall
provide the Corporation with the right to prepay same without
premium or penalty. The purchase price of such Capital Stock
or Stock Equivalents may be paid in cash, Redemption
Securities or any combination thereof.
(2) If less than all the redeemable shares held
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by such shareholders are to be redeemed, the shares to be
redeemed shall be selected in such manner as shall be
determined by the Board of Directors, which may include
selection first of the most recently purchased shares thereof,
selection by lot, or selection in any other manner determined
by the Board of Directors.
(f) If the Corporation or a subsidiary owns a riverboat gaming
vessel and determines that one or more persons who are not citizens of the
United States as determined under the Shipping Act of 1916, as amended, or the
Merchant Marine Act of 1936, as amended ("Foreign Citizens"), own more than 25%
of the Corporation's outstanding Capital Stock, the Corporation may require the
Foreign Citizen(s) who most recently acquired the shares that bring total
Foreign Citizen ownership to more than 25% of the outstanding Capital Stock
("Excess Shares") to divest the Excess Shares to persons who are United States
citizens. If the Foreign Citizen(s) so directed fail to divest all of the Excess
Shares to United States citizens within 30 days after the date on which the
Corporation gives written notice to the Foreign Citizen(s) to divest the Excess
Shares, the Corporation shall also have the right to conduct a Regulatory
Redemption with regard to the shares that the Foreign Citizen failed to divest
as required by the Corporation's notice.
(g) When any Divestiture Order becomes final and non-appealable,
or whenever there is a Gaming Authority or Board determination pursuant to this
Article 9(2) or (4), or when the Corporation tenders the first installment of
consideration for which it may acquire Capital Stock or Stock Equivalents as
described in this Article 9, whichever occurs first, the Capital Stock or Stock
Equivalents in question shall no longer be entitled to any voting, dividend or
other rights, if any, until such time as they have been appropriately placed in
a Trust (in which case the Trustee will have the exclusive right to vote such
securities) or divested, whereupon all such rights shall be restored
respectively from the date of the divestiture.
(h) The foregoing provisions of this Article 9 relating to
required divestiture and permitted redemption by the Corporation of Capital
Stock and Stock Equivalents in certain instances, are in addition to, and not in
replacement of, any applicable legal requirements.
(i) Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
66 2/3% of the voting power of all of the shares of the Corporation entitled to
vote for the election of Directors shall be required to amend, repeal or adopt
any provision inconsistent with this Article 9.
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(j) The Board of Directors shall have the authority to direct
the Corporation's transfer agent to transfer Capital Stock or Stock Equivalent
consistent with this Article 9 regardless of the consent or acquiescence of the
Beneficial Owner or Holder.
(k) Definitions. Capitalized terms used in this Article 9 shall
have the meanings provided below.
"Affiliate" shall have the meaning ascribed to such
term in Rule 12b-2 under the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Act") .
The term "registrant" as used in said Rule 12b-2 shall mean the
Corporation.
"Beneficial Owner" shall mean any Person who, singly
or together with any of such Person's Affiliates, directly or
indirectly, has "beneficial ownership" of Capital Stock (as
determined pursuant to Rule 13d-3 of the Securities Exchange Act
of 1934, as amended).
"Fair Market Value" of a share of Capital Stock or
Stock Equivalent shall mean the average Closing Price for such a
security over the five (5) most recent days during which
securities of such class or series shall have been traded
preceding the day on which notice of redemption shall have been
given pursuant to Section (a) of Article 9; provided, however,
that if securities of such class or series are not traded on any
securities exchange or in the over-the-counter market, "Fair
Market Value" shall be determined by the Board of Directors in
good faith. "Closing Price" on any day means the reported
closing sales price or, in case no such sale takes place, the
reported closing bid price on the principal United States
Securities Exchange registered under the Act on which such
security is listed, or, if such security is not listed on any
such exchange, the highest closing sales price or bid quotation
for such security on the National Association of Securities
Dealers, Inc., Automated Quotation System (including the
National Market System) or any system then in use, or, if no
such prices or quotations are available, the fair market value
on the day in question as determined by the Board of Directors
in good faith.
"Gaming Authority" shall mean any governmental,
quasi-governmental, Tribal, or other private authority or entity
or any officer or official thereof, with the power to regulate
any form of gaming or to interpret or enforce the laws and
regulations applicable to any form of gaming that has
jurisdiction over any entity in which
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the Corporation has a direct or indirect beneficial, legal or
voting interest, whether now or hereafter in existence.
"License" shall mean any license, permit, franchise,
certificate, approval, designation or other authorization from
any Gaming Authority required to own, lease, operate or
otherwise conduct or manage any gaming operation and/or gaming
business or activity being conducted or to be conducted by the
Corporation or any of its Affiliates, whether now or hereafter
in existence.
"Person" shall mean any natural person, corporation,
firm, partnership, association, government, governmental agency,
or any other entity, whether acting in an individual, fiduciary,
or any other capacity.
"Redemption Securities" shall mean any debt or equity
securities of the Corporation, any subsidiary or any other
corporation, or any combination thereof, having such terms and
conditions as shall be approved by the Board of Directors and
which, together with any cash to be paid as part of the
redemption price, in the opinion of any nationally recognized
investment banking firm selected by the Board of Directors
(which may be a firm which provides other investment banking,
brokerage or other services to the Corporation), has a value, at
the time notice of redemption is given pursuant to paragraph
(4), section (a) of Article 9, at least equal to 75% of the Fair
Market Value of the shares to be redeemed pursuant to Section
(a) of Article 9 (assuming, in the case of Redemption Securities
to be publicly traded, such Redemption Securities were fully
distributed and subject only to normal trading activity).
"Stock Equivalents" shall mean any warrants, options,
or any other securities convertible into Capital Stock (whether
or not currently exercisable).
10. NOL Preservation. Solely for the purpose of permitting the
utilization of the net operating loss carryovers, capital loss carryovers and
future deductions (and "Tax Benefits") to which the Corporation (or any other
member of the consolidated group of which the Corporation is common parent for
federal income tax purposes) is or may be entitled pursuant to the Code (as
defined below), the following restrictions shall apply during the Restriction
Period (as such term is defined below) unless
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such restrictions have been waived in accordance with Subparagraph (f) below.
(a) Certain Definitions.
(i) The term "Five Percent Holder" means any person or entity
that owns, or that is treated as owning after application
of the constructive stock ownership rules of Section
382(1)(3) of the Code, five (5) percent or more of the
Common Stock immediately following the Effective Date of
the Plan.
(ii) The term "Non-Five Percent Holder" means any person that
not a Five Percent Holder.
(iii) The term "the Code" means the Internal Revenue Code of
1986, as amended and the Treasury Regulations (final,
temporary and proposed) issued thereunder.
(iv) The term "Transfer", when applied to any of the Common
Stock, means to issue, sell, transfer, pledge, encumber,
grant an option with respect to, or otherwise dispose of
an interest in such stock, but only if such transaction
would result in a change in the ownership of such stock
after application of the constructive stock ownership
rules of Section 382(1)(3) of the Code.
(v) The term "Tax Advisor" means the person or person
appointed by the Board of Directors to exercise the
powers set forth in Section 7 below.
(vi) The term "Restriction Period" means that time period
beginning on the Effective Date and ending on the date
determined under Subparagraph (f) of this Section 10.
(vii) The term "Acquire", when applied to any of the Common
Stock, means to purchase or otherwise acquire such stock.
The term "Acquire" includes any acquisition of an
interest in stock, including acquisition of an option to
acquire stock, if such acquisition would result in a
change in the ownership of such stock after application
of the constructive stock ownership rules of Section
382(1)(3) of the Code.
(viii)The term "person" includes both entities and natural
persons.
(b) Restrictions Imposed Generally on Five Percent Holders
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(i) During the Restriction Period each Five Percent Holder
may Transfer up to but not in excess of five (5%) percent
of such holder's Initial Allotment (hereinafter, such
Holder's "Unrestricted Shares") without the consent of
the Corporation's Tax Advisor. Any proposed Transfer by a
Five Percent Holder during the Restriction Period of
shares other than, or in excess of, its Unrestricted
Shares must be approved by the Corporation's Tax Advisor.
(ii) If any Five Percent Holder reduces its ownership of
Common Stock at any time during the Restriction Period to
an amount that is less than its Initial Allotment, such
holder shall not be permitted thereafter to Acquire any
additional shares of Common Stock during the Restriction
Period.
(c) Stock Escrow. In order to insure compliance with the trading
restrictions imposed on Five Percent Holders, unless otherwise waived by the
Corporation, all stock certificates representing shares of Common Stock issuable
to any Five Percent Holder in excess of such holder's Unrestricted Shares shall
be held in escrow by the Corporation during the Restriction Period, unless
released earlier in connection with an assignment of trading rights (as provided
in Subparagraph (d) below) or to permit the settlement of a proposed Transfer
approved by the Corporation's Tax Advisor. Each Five Percent Holder (or its
nominee or depositary, if applicable), shall be deemed to be the record owner
of, and shall be entitled to vote, all shares represented by stock certificates
held in escrow by the Corporation pursuant to this Subparagraph (c).
(d) Assignment of Trading Rights. At any time during the
Restriction Period, any Five Percent Holder may assign to any other Five Percent
Holder the right to Transfer an amount of shares of Common Stock equal to or
less than the assignor's Unrestricted Shares that have not, as of the date of
the assignment, been Transferred. In the event of such an assignment, the
assignor's and assignee's remaining shares will be appropriately reclassified as
restricted and unrestricted to reflect that assignment.
(e) Consent of the Corporation's Tax Advisor. The Board of
Directors shall appoint a person or persons to serve as Tax Advisor. The Tax
Advisor shall be responsible for considering requests for the Transfer of stock
by Five Percent Holders in excess of their Unrestricted Shares, as provided in
this Subparagraph (e). The Corporation shall indemnify the Tax Advisor against
any liability to any person for any action taken in the exercise of its
discretion under this Subparagraph (e).
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Neither the Corporation nor any Five Percent Holder shall issue, sell,
Transfer, pledge, encumber, receive a pledge or encumbrance of, grant or Acquire
an option with respect to, or otherwise dispose of or Acquire an interest in any
Common Stock of the Corporation (other than, in the case of a Five Percent
Holder, its Unrestricted Shares) without obtaining a prior determination from
the Tax Advisor as to whether such transaction constitutes a Transfer of such
stock within the meaning of Section (a)(iv) of this Section 10. If the Tax
Advisor determines that such transaction constitutes a Transfer of such stock,
in the case of a proposed transaction by the Corporation, the Tax Advisor shall
notify the Board of Directors of such determination, and in the case of a
proposed transaction by a Five Percent Holder, the restrictions of this Section
10 shall apply.
Upon application (hereinafter, the "Application") by any Five Percent
Holder (hereinafter, the "Applicant") for the Tax Advisor's consent to the
Transfer of any of the Common Stock of the Corporation held by such Five Percent
Holder in excess of such Five Percent Holder's Unrestricted Shares, the Tax
Advisor shall send notice to all Five Percent Holders (including the Applicant)
of the Application (hereinafter a "Notice of Application"). Such Notice of
Application shall specify the number of shares for which the Applicant seeks
approval. Within 10 days of the Notice Effective Date (as hereinafter defined)
of such Notice of Application, any other Five Percent Holder may notify
(hereinafter a "Notification") the Tax Advisor that it requests the right to
Transfer a specified amount of its Initial Allotment, which shall not exceed its
Initial Allotment multiplied by a fraction. The numerator of such fraction shall
be the number of shares specified in the Application and the denominator of such
fraction shall be the Initial Allotment of the Applicant. The Notice of
Application or any amendment thereof shall be deemed effective on the date (the
"Notice of Effective Date") on which the Notice of Application is actually
received by the last Five Percent Holder to receive such Notice of Application
(as evidenced by a signed receipt or comparable documentary evidence of
delivery).
Following the expiration of such 10-day period, the Tax Advisor shall
make a determination as to whether the Transfer of all of the shares specified
in the Application and all Notifications would create an unreasonable risk of
loss of, or material limitation on, the Corporation's use of its net operating
loss carryforwards. Such determination shall be made in the Tax Advisor's sole
discretion after reviewing all information available to it, including, but not
limited to all Form 13-d's filed with the Securities and Exchange Commission. If
the Tax Advisor determines that the Transfer of all such
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shares would not create an unreasonable risk of loss of, or material limitation
on the Corporation's use of its net operating loss carryforwards, it shall
notify the Applicant and all other Five Percent Holders of its consent to such
Transfers (hereinafter a "Notice of Final Consent"). If the Tax Advisor
determines that it cannot consent to all proposed Transfers, it shall determine
the maximum number of shares the Transfer of which it can approve (hereinafter,
the "Maximum Amount") without creating an unreasonable risk of loss of, or
material limitation on, the Corporation's use of its net operating loss
carryforwards. The Maximum Amount shall be allocated among the Applicant and the
other Five Percent Holders that submitted Notifications to the Tax Advisor in
accordance with this Subparagraph (e), if any, as follows. The Applicant shall
be permitted to sell that portion of the Maximum Amount equal to the ratio that
the number of shares specified in the Application bears to the sum of the number
of shares specified in such Application and all of the Notifications submitted
to the Tax Advisor in accordance with this Subparagraph (e), if any. Each other
Five Percent Holder that submitted a Notification submitted to the Tax Advisor
in accordance with this Subparagraph (e), if any, shall be permitted to sell
that portion of the Maximum Amount equal to the ratio that the number of shares
specified in such Notification bears to the sum described in the preceding
sentence. The Tax Advisor shall send Notice of Final Consent to the Applicant
and such other Five Percent Holder or Five Percent Holders, if any, of the
number of shares that each may sell based on the foregoing calculations, which
notice shall constitute final consent to the Transfer of such shares.
The Transfer of any shares of stock pursuant to a Notice of Final
Consent shall be completed, (i) in the case of a Five Percent Holder that has
submitted a Notification not later than the later of (a) 35 days after the
Notice Effective Date of the relevant Notice of Final Consent and (b) 45 days
after the Notice Effective Date of the relevant Notice of application and (ii)
in the case of the Applicant, not later than 35 days after the Notice Effective
Date of the relevant Notice of Final Consent. Each Five Percent Holder that
Transfer shares pursuant to a Notice of Final Consent shall give notice to the
Tax Advisor that such Transfer has been completed within 5 days after the
Transfer has been completed. If any such Transfer has not been completed by the
end of the relevant time period (as determined under the first sentence of this
paragraph), final consent shall be deemed to have been withdrawn as to such
Transfer. If a Five Percent Holder that submitted a Notification does not
complete such a Transfer by the end of the relevant time period, the Tax Advisor
shall consent to the Transfer by the Applicant of a number of shares (in
addition to the number of shares to be Transferred by the Applicant pursuant to
the relevant Notice of final Consent)
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equal to the number of shares the Transfer of which was not completed. In no
event, however, shall the Tax Advisor consent to the Transfer by the Applicant
of a number of shares that, in the aggregate, exceeds the number of shares
specified in the Application. The Tax Advisor shall notify the Applicant and all
other Five Percent Holders that it has consented to the Transfer of such
additional shares (hereinafter, an "Amended Notice of Final Consent"). The
Applicant shall complete the Transfer of such additional shares within 10 days
after the Notice Effective Date of the Amended Notice of Final Consent, and if
it does not do so, consent to the Transfer of such additional shares shall be
deemed to be withdrawn.
The Tax Advisor shall use its best efforts to take all actions
required under this Subparagraph (e) as promptly as practicable.
(f) Restriction Period. Except as otherwise provided in this
Subparagraph (f), the Restriction Period shall end on the date that is two years
after the Effective Date.
If the Corporation determines either that (A) the Plan does not
qualify under Section 382(1)(5) of the Code (the "Bankruptcy Exception") or (B)
chooses to make an election under Section 382(1)(5)(H) of the Code not to have
the Bankruptcy Exception apply to the Plan, then the Restriction Period shall
end immediately upon notification thereof by the Gatekeeper to all 5% Holders.
If at any time the Board of Directors in its reasonable business
judgment determines that either (A) the restrictions are not longer necessary to
avoid a loss of the Corporation's net operating loss carryforwards, or (B)
significant net operating loss carryforwards are no longer available to, or
reasonably usable by, the Corporation for any reason, including through passage
of time, usage, restriction or disallowance, the Board of Directors shall
declare the Restriction Period terminated. If at any time the Board of Directors
in its reasonable business judgment unanimously determines that preservation of
the net operating loss carry forwards is no longer in the best interests of the
Corporation and its stockholders, the Board of Directors may declare the
Restriction Period terminated.
The Board of Directors may, in its sole discretion, determine that the
Restriction Period is to extend beyond the date that is two years after the
Effective Date, if the Board determines that such extension of the Restriction
Period would be in the best interests of the Corporation and its stockholders.
In no event, however, will the Restriction Period end later than the date that
is three years after the Effective Date.
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(g) Consequences of Prohibited Transfer
(i) Unless a Transfer is permitted under this Section 10 or approved
by the Tax Advisor, any attempted Transfer of Common Stock in excess of the
Common Stock that could be Transferred to the transferee without restriction
under Section 10 shall not be effective to Transfer ownership of such Common
Stock (the "Prohibited Shares") to the purported acquirer thereof, who shall not
be entitled to any rights as a stockholder of the Corporation with respect to
such Prohibited Shares (including, without limitation, the right to vote or to
receive dividends with respect thereto).
(ii) Upon a determination by the Corporation that there has been or is
threatened a purported Transfer of Prohibited shares, the Corporation may take
such action in addition to any action as it deems advisable to give effect to
the provisions of Section 10, including, without limitation, refusing to give
effect on the books of the Corporation to such purported Transfer or instituting
proceedings to enjoin such purported Transfer.
(iii) The Corporation may require as a condition to the registration
of the Transfer of any shares of its Common Stock that the proposed transferee
furnish to the Corporation all information reasonably requested by the
Corporation and reasonably available to the proposed transferee and its
affiliates with respect to the direct or indirect ownership interests of the
proposed transferee (and of persons to whom ownership interests of the proposed
transferee would be attributed for purposes of Section 382 of the Code) in
Common Stock.
(iv) All certificates evidencing ownership of shares of Common Stock
that are subject to the restrictions on Transfer contained in this Section 10
shall bear a conspicuous legend referencing the restrictions set forth in this
Section 10 substantially as follows:
"TRANSFER OF THE COMMON STOCK REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO RESTRICTIONS PURSUANT TO
SECTION 10 OF THE AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF CAPITAL GAMING INTERNATIONAL,
INC., AND HOLDERS ARE REFERRED TO SUCH AMENDED AND
RESTATED CERTIFICATE FOR A FULL AND COMPLETE
UNDERSTANDING THEREOF."
In addition, the certificate issued to each person which will, pursuant
to the distributions under the Plan, beneficially own (within the meaning of
Rule 13d-3 under the 1934 Act as in
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effect on the date hereof) 10 percent or more of the total Common Stock will
bear a conspicuous legend substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND WERE ISSUED PURSUANT TO
AN EXEMPTION PROVIDED BY 11 U.S.C. 1145 UNDER AN
ORDER CONFIRMING THE PLAN OF REORGANIZATION IN THE
CASE ENTITLED IN RE CAPITAL GAMING INTERNATIONAL,
INC., CASE NO. 96 19829 (JHW), IN THE UNITED
STATES BANKRUPTCY COURT FOR THE DISTRICT OF NEW
JERSEY. TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS SET
FORTH IN THE REGISTRATION RIGHTS AGREEMENT BETWEEN
CAPITAL GAMING INTERNATIONAL, INC. AND CERTAIN
OTHER PERSONS, AND HOLDERS ARE REFERRED TO SUCH
AGREEMENT FOR A FULL AND COMPLETE UNDERSTANDING
THEREOF."
(v) The Board of Directors shall have the authority to take such other
action to the extent permitted by law as it deems necessary or advisable to
protect the Corporation and the interests of the holders of its securities in
preserving the Tax Benefits, provided that no such action prevents a Transfer
which would otherwise be permitted under this Section 10, and that prior to
taking any such other action, the Board of Directors shall consider the benefits
and detriments of such action to the stockholders of the Corporation as a whole.
(vi) The Corporation and the Board of Directors shall be fully
protected in relying in good faith upon the information, opinions, reports or
statements of the chief executive officer, the chief financial officer, or the
chief accounting officer of the Corporation or of the Corporation's legal
counsel, independent auditors, transfer agent, investment bankers and other
employees and agents in making the determinations and findings contemplated by
this Section 10 to the fullest extent permitted by law. Any determination by the
Board of Directors pursuant to this Section 10 shall be conclusive.
(vii) If any provision of this Section 10 or any application of such
provision is determined to be invalid by any federal or state court having
jurisdiction over the issue, the validity of the remaining provision shall not
be affected and other applications of such provision shall be affected only to
the extent necessary to comply with the determination of such court.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officer, this _____ day of _________________,
1997.
CAPITAL GAMING INTERNATIONAL, INC.
By:_______________________________
Edward M. Tracy
President and Chief Executive Officer
c:\restated.cer
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CAPITAL GAMING INTERNATIONAL, INC.
Exhibit "C" To Plan Of Reorganization
Post-Confirmation Employee Stock Incentive Plan
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CAPITAL GAMING INTERNATIONAL, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of the 1997 Stock Option Plan of Capital
Gaming International, Inc. is to provide incentive to employees, including
officers, directors and consultants of the Company or any Subsidiary, as defined
below, to encourage such individuals' proprietary interest in the Company or any
Subsidiary, to encourage such individuals to remain in the employ of the Company
or any Subsidiary, and to attract to the Company or any Subsidiary individuals
of experience and ability.
2. Definitions.
(a) "Advisory Committee" shall have the same meaning as such term
has in the Company's plan of reorganization, as confirmed by
order of the United States Bankruptcy Court for the District
of New Jersey on or about March __, 1997.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall means the full Board, the Compensation
Committee of the Board or such other committee appointed by
the Board to administer the Plan in accordance with Section 4
of the Plan.
(e) "Common Stock" shall mean the Common Stock of the Company, no
par value per share.
(f) "Company" shall mean Capital Gaming International, Inc., a
New Jersey corporation.
(g) "Disability" shall mean the condition of an Employee who is
unable to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
lasted or can be expected to last for a continuous period of
not less than twelve (12) months, all within the meaning of
Section 22(e)(3) of the Code.
(h) "Employee" shall mean any individual (including an officer or
a director) who is an employee of the
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Company or any Subsidiary (within the meaning of Section 422
of the Code and the regulations thereunder).
(i) "Exchange Act" means the Securities Exchange Act of 1934.
(j) "Exercise Price" shall mean the exercise price set for an
Option described in Section 7(c).
(k) "Fair Market Value" on a given date means (i) if the Share is
listed on a national securities exchange, the mean between
the highest and lowest sale prices reported as having
occurred on the primary exchange with which the Share is
listed and traded on the date prior to such date, or, if
there is no such sale on that date, then on the last
preceding date on which such a sale was reported; (ii) if the
Share is not listed on any national securities exchange but
is quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System
on a last sale basis, the average between the high bid price
and low ask price reported on the date prior to such date,
or, if there is no such sale on that date, then on the last
preceding date on which a sale was reported; or (iii) if the
Share is not listed on a national securities exchange nor
quoted in the National Market System of the National
Association of Securities Dealers Automated Quotation System
on a last sale basis, the amount determined by the Committee
to be the fair market value based upon a good faith attempt
to value the Share accurately.
(l) "Incentive Stock Option" shall mean an Option described in
the Code Section 422.
(m) "Nonqualified Option" shall mean an Option which is not an
Incentive Stock Option.
(n) "Non-Vested Option" shall mean any Option which is not
currently exercisable under the provisions of an Option
Agreement.
(o) "Option" shall mean either an Incentive Stock Option or
Nonqualified Stock Option granted pursuant to the Plan.
(p) "Optionee" shall mean a person to whom an Option
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has been granted.
(q) "Option Agreement" shall mean any agreement pursuant to which
an Option is granted hereunder.
(r) "Senior Executive" shall mean an Employee who is the Chief
Executive Officer, President, an Executive Vice-President or
a Senior Vice-President of the Company.
(s) "Subsidiary" means any corporation 50% or more of whose stock
having general voting powers is owned by the Company, or by
another Subsidiary, as herein defined, of the Company.
(t) "Plan" shall mean the Capital Gaming International, Inc. 1997
Stock Option Plan.
(u) "Purchase Price" shall mean the Exercise Price times the
number of whole Shares with respect to which an Option is
exercised.
(v) "Share" shall mean one share of Common Stock.
(w) "Ten Percent Shareholder" shall mean any Employee who, at the
time of the grant of an Option, owns (or is deemed to own,
under Sections 422(b)(6) and 424 (d) of the Code) more than
ten percent of the total combined voting power of all classes
of outstanding stock of the Company or any Subsidiary.
(x) "Vested Option" shall mean any Option which is currently
exercisable under the provisions of an Option Agreement.
3. Effective Date. This Plan is conditioned upon its approval by the
shareholders of the Company on or before ______________ __, 1997 by the vote of
the holders of a majority of the stock of the Company voting at such meeting in
person or by proxy; except that this Plan is adopted and approved by the Board
of Directors effective ________________ __, 1997 to permit the grant of Options
prior to the approval of the Plan by shareholders of the Company as aforesaid.
In the event the Plan is not approved by shareholders of the Company as
aforesaid, this Plan and any Options granted hereunder shall be void and of no
force and effect. Approval of the Plan of Reorganization by the Bankruptcy Court
and any creditors of the Company who are entitled to vote with respect thereto
pursuant to the applicable provisions of the Bankruptcy Code shall be deemed to
constitute
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shareholder approval for purposes of this Section 3.
4. Administration. The Plan shall be administered by the Board or a
Committee appointed by the Board consisting of not less than two members, each
member of which, at the time he takes any action with respect to an Option under
the Plan, shall be a "non-employee director," as defined in Rule 16b-3 under the
Exchange Act or any successor rule or regulation. The Board may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. The Board or Committee
shall from time to time at its discretion determine who shall be granted
Options, the number of Shares to be optioned to each, the designation of such
Options as Incentive Stock Options or Nonqualified Options, and the Exercise
Price thereof. All such determinations and the interpretation and construction
by the Board or the Committee of any provisions of the Plan or of any Option
granted thereunder shall be binding and conclusive on all Optionees and their
legal representatives and beneficiaries.
A majority of the members shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present, and
any acts approved in writing by all of the members without a meeting, shall be
the acts of the Committee.
5. Eligibility. Any Employee may be granted Incentive Stock Options
under the Plan and any Employee or officer, director, consultant of, or other
person rendering services to, the Company or any Subsidiary may be granted
Nonqualified Options under the Plan if, in each instance, the Board or Committee
determines that such person performs services of special importance to the
management, operation and development of the business of the Company or any
Subsidiary.
6. Stock. The stock subject to Options granted under the Plan shall be
Shares of authorized but unissued or reacquired Common Stock. The aggregate
number of Shares which may be issued under Options exercised under this Plan
shall not exceed Two Hundred Thousand (200,000); provided, however, with respect
to any Option granted to any Employee who was employed by the Company prior to
the effective date of the Company's Plan of Reorganization in the Company's
chapter 11 case, Case Number 96-19829 ("Plan of Reorganization"), no more than
100,000 of the Shares authorized hereunder may be to subject to Options awarded
under the Plan and with respect to any other Employee of the Company, the
remaining 100,000 Shares authorized hereunder may be subject to Options awarded
under the Plan. The number of Shares subject to Options outstanding under the
Plan at any time may not exceed the number of Shares remaining available for
issuance
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under the Plan. In the event that any Option outstanding under the Plan expires
for any reason or is terminated, the Shares allocable to the unexercised portion
of such Option shall again be available for the grant of Options under the Plan.
The limitations established by this Section 6 shall be subject to
adjustment upon the occurrence of the events specified and in the manner
provided in Section 9 hereof.
7. Terms and Conditions of Options. Options granted pursuant to the
Plan shall be evidenced by Option Agreements in such form as the Board or the
Committee shall from time to time determine, which agreements shall comply with
and be subject to the following terms and conditions:
(a) Date of Grant. Each Option shall specify its Effective Date
(the "date of grant"), which shall be the date specified by
the Board or Committee in its action relating to the grant of
the Option, but which date shall not be earlier than the date
of the determination by the Board or Committee to grant such
Option nor more than ten days after such date.
(b) Number of Shares. Each Option shall state the number of
Shares to which it pertains and shall provide for the
adjustment thereof in accordance with the provisions of
Section 9 hereof.
(c) Exercise Price. Each Option shall state the Exercise Price,
which Exercise Price shall be $1.75 or such lesser amount
approved by the Advisory Committee. The Exercise Price of an
Option shall be subject to adjustment in accordance with
Section 9 hereof.
(d) Exercise of Options and Medium and Time of Payment. Except
for Senior Executives, to exercise an Option, the Optionee
shall give written notice to the Company specifying the
number of Shares to be purchased and accompanied by payment
in cash or by certified check of the full Purchase Price
therefor and the amount of any withholding tax obligation of
the Company or any Subsidiary as described in Section 14(a)
hereof. No Share shall be issued until full payment therefor
has been made.
Senior Executives may pay the aggregate Purchase Price for
the purchased shares in one or more of
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the following alternative forms: (A) full payment, in cash or
by check payable to the Company's order, in the amount of the
Purchase Price for the Option Shares being purchased; (B)
full payment in the shares of common stock of the Company
having an aggregate Fair Market Value on the day of exercise
equal to the Purchase Price for the Option Shares being
purchased (provided the such Shares have been held by the
Senior Executive for at least six months); (C) a combination
of shares of common stock of the Company valued at Fair
Market Value on the day of exercise and cash or check payable
to the Company's order, equal in the aggregate to the
Purchase Price for the Option Shares being purchased
(provided the such Shares have been held by the Senior
Executive for at least six months).
(e) Term and Exercise of Options; Nontransferability of Incentive
Stock Options; Transferability of Nonqualified Options.
Subject to Section 10 hereof, Options may be exercised as
determined by the Board or Committee and as stated in the
written agreement evidencing the Option, provided, however,
that (i) no Option granted hereunder can be exercised until
one (1) year after the date of grant; (ii) no Incentive Stock
Option granted to an Employee who is not a Ten Percent
Shareholder shall be exercisable after the expiration of ten
(10) years from its date of grant, and (iii) no Incentive
Stock Option granted to an Employee who is a Ten Percent
Shareholder shall be exercisable after the expiration of five
(5) years from its date of grant. In addition, the aggregate
fair market value (determined at the time an Incentive Stock
Option is granted) of Shares with respect to which Incentive
Stock Options are exercisable for the first time by the same
Optionee during any calendar year (under this Plan and all
other plans maintained by the Company or any Subsidiary)
shall not exceed $100,000. During the lifetime of the
Optionee, the Incentive Stock Option shall be exercisable
only by the Optionee and shall not be assignable or
transferable. In the event of the Optionee's death, no
Incentive Stock Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and
distribution. All Nonqualified Options granted pursuant to
the Plan are transferable subject to compliance with the
Securities Act of 1933, as amended, and any
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<PAGE>
applicable state securities or Blue Sky Laws. Upon surrender
of a Nonqualified Option to the Company or to the office of
its stock transfer agent, if any, with the funds sufficient
to pay any transfer tax, the Company shall, without a charge,
execute and deliver a new Nonqualified Option in the name of
the transferee named in such instrument of assignment and the
Nonqualified Option shall promptly be canceled. The
Nonqualified Option may be divided or combined with other
Nonqualified Options which carry the same rights upon
presentation thereof at the office of the Company or at the
office of its stock transfer agent, if any, together with a
written notice specifying the names and denominations in
which new Nonqualified Options are to be issued and signed by
the Optionee thereof. The term "Option" as used herein
includes any Nonqualified Options into which a Nonqualified
Option may be divided or exchanged.
(f) Termination of Employment.
(i) If an Optionee is a Senior Executive, the following shall
apply:
(a) If the Senior Executive is terminated for cause, (as
defined in such Senior Executive's Employment Agreement),
then all Non-vested Options shall terminate. All Vested
Options which are Incentive Stock Options shall be
exercisable for a period of three (3) months after the
date of termination, and all Vested Options which are
Nonqualified Stock Options shall be exercisable until the
date set forth for their termination in the applicable
Option Agreement.
(b) If the Senior Executive is terminated without cause
or voluntarily resigns or retires, all Options shall vest
immediately to the extent they are not already Vested
Options, and the Senior Executive shall have three (3)
months within which to exercise Incentive Stock Options
and thirty-six (36) months within which to exercise
Nonqualified Options.
(c) In the event of the death or Disability
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<PAGE>
of a Senior Executive, all Options shall vest immediately
to the extent they are not already Vested Options. All
Options which are Incentive Stock Options must be
exercised within twelve (12) months of the date of death
or Disability and all Non-Incentive Options must be
exercised within thirty-six (36) months of the date of
death or Disability.
(ii) For all employees and consultants other than Senior
Executives, the following shall apply:
(A) If the employee/consultant is terminated for cause
(as determined in good faith by the Committee), then all
Non-Vested Options shall terminate. The Committee may, in
its discretion, terminate Vested Options or permit their
exercise within three (3) months of the date of
termination.
(B) If the employee/consultant is terminated without
cause or voluntarily resigns or retires, such termination
shall have no effect on all Nonqualified Options, which
shall continue to vest and be exercisable as set forth in
the Option Agreement. All Incentive Stock Options which
are Vested Options may be exercised for a period of three
(3) months of the day of termination. All Non-Vested
Options shall automatically terminate.
(C) In the event of death or Disability, all Options
which are Vested Incentive Stock Options must be
exercised within twelve (12) months of the date of death
or Disability and all Vested Non-Incentive Options must
be exercised within thirty-six (36) months of the date of
death or Disability. All Non-Vested Options shall
terminate.
(iii) For the purposes of (i) and (ii) above, the employment
relationship will be treated as continuing intact while
the Optionee is on military leave, sick leave or other
bona fide leave of absence (to be determined in the sole
discretion of the Board and, in the case of an Optionee
who has received an Incentive Stock Option, only to the
extent permitted under Section
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<PAGE>
422 of the Code and the regulations promulgated thereunder).
Moreover, in the case of an Optionee who has been granted an
Incentive Stock Option, employment shall, in no event, be
deemed to continue beyond the ninetieth (90th) day after the
Optionee ceased active employment, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
(g) Rights as a Shareholder. An Optionee or a transferee of a
deceased Optionee shall have no rights as a shareholder with
respect to any Shares covered by his or her Option until the
date of the issuance of a stock certificate for such Shares.
No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property)
or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as
provided in Section 9.
(h) Modification, Extension and Renewal of Options. Subject to
the terms and conditions and within the limitations of the
Plan, the Board or Committee may modify, extend or renew
outstanding Options granted under the Plan, or accept the
cancellation of outstanding Options (to the extent not
theretofore exercised) for the granting of new Options in
substitution therefor. Notwithstanding the foregoing,
however, no modification of an Option shall, without the
consent of the Optionee, alter or impair any rights or
obligations under any Option theretofore granted under the
Plan. Moreover, in the case of any modification, extension or
renewal or an Incentive Stock Option, all of the requirements
set forth herein shall apply in the same manner as though a
new Incentive Stock Option had been granted to the Optionee
on the date of such modification, extension or renewal, but
only if such modification, extension or renewal is treated,
under Section 424(h) of the Code, as the granting of a new
Option.
(i) Identification of Option. Each Option granted under the Plan
shall clearly identify its status as an Incentive Stock
Option or Nonqualified Option.
(j) Other Provisions. Except for Senior Executives, the Option
Agreements authorized under the Plan
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<PAGE>
shall contain, in addition to those provisions provided in
Section 7(e) hereof, such other provisions not inconsistent with
the terms of the Plan, including, without limitation,
restrictions upon the exercise of any Option, and restrictions
upon the transfer of Shares received upon exercise of Options, as
the Board or Committee shall deem advisable. With respect to
Senior Executives, the Option Agreements shall not impose any
further restrictions, limitations or qualifications on the rights
to exercise the Options set forth herein, but may contain such
other terms which are not inconsistent with the terms of the Plan
as the Board or Committee shall deem advisable.
8. Term of Plan. Options may be granted pursuant to the Plan for up to
ten years from the Effective Date of the Plan.
9. Recapitalization. Subject to any required action by the
shareholders of the Company and the last sentence of subsection 7(h) hereof, the
number of Shares covered by this Plan as provided in Section 6, the number of
Shares covered by each outstanding Option, and the Exercise Price thereof shall
be proportionately adjusted for the increase or decrease in the number of issued
Shares resulting from a subdivision or consolidation of Shares, stock split, or
the payment of a stock dividend.
Subject to any required action by the shareholders of the Company and
the last sentence of Subsection 7(h) hereof, if the Company shall be the
surviving corporation in any merger or consolidation, each outstanding Option
shall pertain and apply to the securities to which a holder of the number of
Shares subject to the Option would have been entitled. A dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation shall cause each outstanding Option to terminate,
unless the agreement of merger or consolidation shall otherwise provide,
provided that each Optionee shall, in such event, have the right immediately
prior to such dissolution or liquidation, or merger or consolidation in which
the Company is not the surviving corporation to exercise the Option in whole or
in part, subject to limitations on exercisability of Options under Section 7
hereof, to the extent the Option is exercisable without regard to this sentence
at the date of such dissolution, liquidation, merger or consolidation.
In the event of a change in the Common Stock as presently constituted,
which is limited to a change of all of its authorized shares with par value into
the same number of shares with a different par value or without par value, the
shares
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<PAGE>
resulting from any such change shall be deemed to be Shares of Common
Stock within the meaning of the Plan.
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board or
Committee, whose determination in that respect shall be final, binding and
conclusive.
Except as hereinbefore expressly provided in this Section 9, the
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, stock split, or the payment of any stock dividend
or any other increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger, or consolidation or
spin-off of assets or stock of another corporation, and any issue by the Company
of shares of stock of any class or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to the Option.
The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
consolidate or to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
10. Securities Law Requirements. No Shares shall be issued upon the
exercise of any Option unless and until the Company has determined that: (i) it
and the Optionee have taken all actions required to register the Shares under
the Securities Act of 1933 or perfect an exemption from the registration
requirements thereof (including the furnishing by the Optionee of an appropriate
investment letter); (ii) any applicable listing requirement of any stock
exchange on which the Common Stock is listed has been satisfied; and (iii) any
other applicable provision of state or Federal law has been satisfied.
11. Amendment of the Plan. The Board or Committee may, insofar as
permitted by law, from time to time, with respect to any Shares at the time not
subject to Options, suspend or discontinue the Plan or revise or amend it in any
respect whatsoever except that the term of the Plan shall not be extended and,
without approval of the shareholders of the Company if the Board or Committee
determines that such approval is necessary to comply with any requirement of law
or rule of any stock exchange on which the Company's equity securities are
traded. With the express written consent of individual Option holders, the Board
or Committee may cancel or reduce or otherwise alter outstanding
146
<PAGE>
Options.
12. Application of Funds. The proceeds received by the Company from
the sale of Common Stock pursuant to the exercise of an Option will be used for
general corporate purposes.
13. No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon the Optionee to exercise such Option.
14. Withholding.
(a) Nonqualified Options. Whenever Shares are to be delivered
upon exercise of a Nonqualified Option, the Company shall
be entitled to require as a condition of delivery that
the Optionee remit to the Company an amount sufficient to
satisfy the Company's federal, state and local
withholding tax obligations with respect to the exercise
of the Option.
(b) Incentive Stock Options. The acceptance of Shares upon
exercise of an Incentive Stock Option shall constitute an
agreement by the Optionee (unless and until the Company
shall notify the Optionee that it is relieved, in whole
or in part, of its obligations under this Section 14(b))
(i) to notify the Company if any or all of such Shares
are disposed of by the Optionee within two years from the
date the Option was granted or within one year from the
date the Shares were transferred to the Optionee pursuant
to his exercise of the Option, and (ii) to remit to the
Company, at the time of and in the case of any such
disposition, an amount sufficient to satisfy the Company
's federal, state and local withholding tax obligations
with respect to such disposition, whether or not, as to
both (i) and (ii), the Optionee is in the employ of the
Company or any Subsidiary at the time of such
disposition.
15. S-8 Registration. The Options authorized by this Plan and the
shares of Common Stock underlying all Options authorized by this Plan shall be
registered with the Securities and Exchange Commission under the Act on Form
S-8. The Company shall file such Form S-8 with the Securities and Exchange
Commission within one (1) year of the Effective Date of this Plan and shall pay
all costs and expenses in connection with the same.
16. Governing Law. The Plan shall be governed by the laws
147
<PAGE>
of the State of New Jersey.
148
<PAGE>
CAPITAL GAMING INTERNATIONAL, INC.
Exhibit "D" To Plan Of Reorganization
Schedule of Assumed Executory Contracts
149
<PAGE>
Schedule of Assumed Executory Contracts
-----------------------------------------
United States Realty & Investment Co. Lease on nonresidential real property
Muckleshoot Indian Tribe Gaming management agreement with
Capital Gaming Management, Inc.
acting as manager for the Muckleshoot
Indian Tribe
Cory H. Morowitz Employment contract
Edward M. Tracy Employment contract (as modified)
Col. Clinton L. Pagano Employment contract (as modified)
William S. Papazian, Esq. Employment contract (as modified)
Joel H. Sterns, Esq. Consulting agreement
Michael W. Barozzi Consulting agreement
Pitney Bowes Lease for postage equipment
Mossman's Business Machines, Inc. Lease for photocopying and facsimile
equipment
Advanced Business Machines Lease for office equipment
Lewan & Associates, Inc. Lease for facsimile equipment
Lackland Storage Lease for storage space
Capital Gaming Management, Inc. Management services agreement
Bernstein, Simpson, Gilbert & Morowitz Accounting services agreement
Alco Capital Resource, Inc. Lease for facsimile equipment
Ikon Office Solutions Facsimile equipment maintenance
agreement
150
<PAGE>
UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF NEW JERSEY
___________________________________________
)
In the Matter of: )
)
) (Hon. Judith H. Wizmur)
CAPITAL GAMING INTERNATIONAL, )
INC., a New Jersey corporation, ) Chapter 11
) Case No. 96-19829 (JHW)
Debtor and )
Debtor-in-Possession. )
)
___________________________________________
DISCLOSURE STATEMENT FOR
DEBTOR'S FIRST AMENDED PLAN
OF REORGANIZATION
February 6, 1997
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
(212) 821-8000
Co-Counsel for Debtor-in-Possession
BNS-1945
CRUMMY, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(201) 596-4500
Co-Counsel for Debtor-in-Possession
FV-6343
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. PRELIMINARY STATEMENT..............................................1
ARTICLE II. SUMMARY OF DISTRIBUTIONS UNDER THE PLAN...........................3
ARTICLE III. GENERAL BACKGROUND...............................................6
3.1. Introduction.......................................................6
3.2. Executive Offices; Financial Information...........................6
3.3. Capital Structure of the Debtor....................................6
3.4. Description of the Debtor's Business...............................6
Historical Information............................................6
Native American Gaming Operations.................................7
Native American Gaming Law and Regulation.........................9
Riverboat Gaming.................................................10
3.5. Events Leading to the Debtor's Chapter 11.........................10
3.6. Commencement of the Chapter 11 Case...............................11
ARTICLE IV. CHAPTER 11 PROCEEDINGS...........................................11
4.1. Appointment of Creditors' Committee...............................11
4.2. Retention of Professionals........................................12
4.3. Major Developments................................................12
Cash Collateral..................................................12
Exclusivity Periods..............................................12
Transfer Motion..................................................12
4.4. Plan Negotiations.................................................12
4.5. Review of Claims..................................................13
4.6. Preference and Other Avoidance Actions............................13
ARTICLE V. PLAN OF REORGANIZATION............................................14
5.1. Classification And Treatment Of Claims And Interests..............14
Class 1 -- Nontax Priority Claims................................14
Class 2 -- Noteholder Secured Claims.............................14
Class 3 -- Secured Claims........................................14
Class 4 -- General Unsecured Claims..............................15
Class 5 -- Old Common Stock......................................15
Class 6 -- Old Options...........................................15
(i)
<PAGE>
5.2. Other Terms of the Plan...........................................15
Effective Date...................................................15
Surrender of Notes and Other Securities..........................15
Filing Claims....................................................16
Executory Contracts..............................................17
Unclaimed Distributions Under the Plan...........................17
Rounding........................................................ 17
Conditions Precedent to Confirmation and Effective Date
of Plan..........................................................17
Miscellaneous Provisions of the Plan.............................18
5.3. Financing Arrangements............................................20
5.4. Methodology Used By Debtor In Arriving At Certain
Assumed Values....................................................20
Enterprise Value and Reorganization Equity Value.................20
ARTICLE VI. BOARD OF DIRECTORS AND MANAGEMENT OF THE REORGANIZED DEBTOR......24
6.1. Post-Confirmation Management......................................24
6.2. Management Incentive Programs.....................................26
6.3. Employment Agreements.............................................26
ARTICLE VII. ALTERNATIVES TO THE PLAN........................................27
7.1. Liquidation as an Alternative.....................................28
7.2. Best Interests Of Unsecured Creditors And Shareholders............28
ARTICLE VIII. CONFIRMATION AND CONSUMMATION PROCEDURES.......................29
Creditors Entitled To Vote..........................................29
8.2. General Voting Instructions.......................................30
8.3. Soliciting For Votes..............................................31
8.4. Acceptance........................................................31
8.5. Non Acceptance And "Cramdown".....................................31
8.6. Confirmation Of The Plan..........................................31
8.7. Confirmation Hearing..............................................32
ARTICLE IX. FEDERAL TAX CONSEQUENCES.........................................33
9.1. Federal Income Tax Consequences to the Debtor.....................34
Utilization by the Debtor of Existing Tax Attributes............34
Alternative Minimum Tax.........................................35
9.2. Federal Income Tax Consequences to Creditors......................36
Generally.......................................................36
Creditors Who Receive Solely Cash...............................36
Creditors Who Receive Cash and Stock............................36
Receipt of Interest.............................................38
9.3. Federal Income Tax Consequences to Holders of Common Stock........38
(ii)
<PAGE>
9.4. Federal Income Tax Consequences of Owning New Secured Notes.......38
Original Issues Discount........................................38
Market Discount.................................................38
Disposition of New Secured Notes................................39
9.5. Importance of Obtaining Professional Tax Assistance...............39
ARTICLE X. RECOMMENDATION AND CONCLUSION.....................................40
Appendix "1" DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, DATED
FEBRUARY 6, 1997 (WITH APPENDICES THERETO)
Exhibit "A" AMENDED AND RESTATED INDENTURE
Exhibit "B" AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Exhibit "C" POST-CONFIRMATION EMPLOYEE STOCK INCENTIVE PLAN
Exhibit "D" SCHEDULE OF ASSUMED EXECUTORY CONTRACTS
Appendix "2" UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF DEBTOR AS OF
SEPTEMBER 30, 1996
Appendix "3" CONSOLIDATED AUDITED FINANCIAL STATEMENTS OF DEBTOR AS OF
JUNE 30, 1996
Appendix "4" CERTAIN PRO-FORMA AND PROJECTED FINANCIAL INFORMATION
Appendix "5" LIQUIDATION ANALYSIS AND CONTRASTING DISTRIBUTIONS UNDER PLAN
VS. CHAPTER 7 LIQUIDATION
Appendix "6" PAYMENTS MADE BY CAPITAL GAMING INTERNATIONAL, INC. TO CREDITORS
DURING STATUTORY PREFERENCE PERIOD
(iii)
<PAGE>
ARTICLE I.
PRELIMINARY STATEMENT
On December 23, 1996, Capital Gaming International, Inc. (the
"Debtor"), filed its Plan of Reorganization, dated December 22, 1996, with the
United States Bankruptcy Court for the District of New Jersey (the "Bankruptcy
Court"). On February 6, 1997 the Debtor filed its First Amended Plan of
Reorganization (the "Plan"). A copy of the Plan is annexed hereto as Appendix
"1". The Debtor has filed this Disclosure Statement with the Court pursuant to
section 1125 of title 11 of the United States Code (the "Bankruptcy Code") and
in connection with the solicitation of votes with respect to the Plan.
THE DEBTOR BELIEVES CONFIRMATION OF THE PLAN IS IN THE BEST INTERESTS
OF THE DEBTOR'S CREDITORS AND EQUITY INTEREST HOLDERS; IT RECOMMENDS THAT YOU
VOTE TO ACCEPT THE PLAN.
On February 6, 1997 the Bankruptcy Court determined that this
Disclosure Statement contains "adequate information" in accordance with section
1125(b) of the Code. Pursuant to section 1125(a)(1) of the Code, "adequate
information" is defined as "information of a kind, and in sufficient detail, as
far as is reasonably practicable in light of the nature and history of the
debtor and the condition of the debtor's books and records, that would enable a
hypothetical reasonable investor typical of holders of claims or interests of
the relevant class to make an informed judgment about the plan, and whether to
accept or reject the plan." 11 U.S.C. ss. 1125(a)(1). Approval of this
Disclosure Statement does not indicate that the Bankruptcy Court recommends
either acceptance or rejection of the Plan.
The Bankruptcy Court has scheduled a hearing to consider confirmation
of the Plan for March 19, 1997 before the Honorable Judith H. Wizmur, United
States Bankruptcy Judge, United States Bankruptcy Court, 15 N. 7th Street,
Camden, New Jersey 08102-1104 at 10:00 a.m., Eastern Standard Time ("EST"). The
hearing may be adjourned from time to time without further notice other than by
announcement in Court on the scheduled date of such hearing. The Bankruptcy
Court has directed that objections, if any, to confirmation of the Plan be
served and filed on or before March 10, 1997 at 5:00 p.m. (Eastern Standard
Time) and votes in respect of the confirmation thereof be submitted on or before
March 12, 1997 at 5:00 p.m. (Eastern Standard Time), each in the manner
described herein under Article VIII -- "Confirmation and Consummation
Procedures."
If you hold a Claim in Class 1, 2, 3 or 4 or an Interest in Class 5 as
listed below, a ballot form for your vote (a "Ballot") is included in the
materials forwarded to you along with this Disclosure Statement.
Class Shorthand Description Color of Ballot
----- --------------------- ---------------
Class 1 Nontax Priority Claims Red
Class 2 Noteholder Secured Claims Blue
Class 3 Secured Claims Green
Class 4 General Unsecured Claims Yellow
Class 5 Old Common Stock White
If you have any questions about the procedure for voting, if a Ballot
is not included and you believe you are a holder of a Claim in one or more of
the Classes listed above or if you have received a damaged Ballot or have lost
your Ballot or you believe you hold or Claim or Interest and are entitled to
vote on the Plan you should contact:
Capital Gaming Balloting
c/o Bankruptcy Services, Inc.
70 East 55th Street
New York, New York 10022
Attn: Laura Campbell
(212) 376-8494
-or-
<PAGE>
CRUMMY, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(201) 596-4500
Co-Counsel for Debtor in Possession
Attention: Sam Della Ferra, Esq.
Every reasonable effort has been made in this Disclosure Statement to
explain fully the various aspects of the Plan as they affect all creditors and
shareholders of the Debtor.
If you hold Claims in more than one Class (as classified in the Plan),
you will receive a separate Ballot for each such Claim.
After reviewing this Disclosure Statement and its appendices and the
Plan, please indicate your vote on the enclosed Ballot (or Ballots) and return
it (them) in the envelope provided in a manner calculated to ensure receipt no
later than 5:00 p.m., EST, on March 12, 1997.
YOUR VOTE(S) WILL NOT BE COUNTED UNLESS YOUR BALLOT (OR IN CERTAIN
CASES, BALLOTS) ARE RECEIVED BY THE BALLOTING AGENT BY 5:00 P.M., EST ON MARCH
12, 1997. If you are the beneficial but not record holder of a Noteholder Claim
or Old Common Stock Interest, your Ballots should be returned as instructed by
the record holder, if any. All other Ballots should be returned directly to the
Debtor by mail in the pre-addressed, postage-paid envelope provided herewith as
follows:
Capital Gaming Balloting
c/o Bankruptcy Services, Inc.
70 East 55th Street
New York, New York 10022
Attn: Laura Campbell
For further information on casting your Ballot, please see Article VIII
of this Disclosure Statement -- Confirmation and Consummation Procedures.
Each holder of 11 1/2% Secured Notes due 2001 (the "Old Secured
Notes"), issued by the Debtor under the Indenture, dated February 17, 1994, as
amended, between the Debtor, certain guarantors and First Trust National
Association (the "Indenture Trustee"), as Trustee (the "Old Indenture"), will
receive two Ballots; one in Class 2 and one in Class 4. Each such holder should
complete and return both ballots.
Do not return any evidence of indebtedness of your Claim against the
Debtor (i.e., notes) or equity interests in the Debtor (i.e., stock
certificates) with your Ballot.
THIS DISCLOSURE STATEMENT CONTAINS ONLY A SUMMARY OF THE PLAN. THIS
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SPECIFIC PROVISIONS OF
THE PLAN, A COPY OF WHICH IS ANNEXED TO THIS DISCLOSURE STATEMENT AS APPENDIX
"1". IT IS RECOMMENDED THAT ALL PARTIES IN INTEREST REVIEW THE FULL TEXT OF THE
PLAN BEFORE DECIDING TO VOTE EITHER TO ACCEPT OR REJECT THE PLAN.
This disclosure statement has not been approved or disapproved by the
Securities and Exchange Commission; nor has the Commission passed upon the
accuracy or adequacy of the statements contained herein. There has been no
independent audit of the financial information contained in this disclosure
statement except as expressly indicated in this disclosure statement.
-2-
<PAGE>
ALL CAPITALIZED TERMS USED HEREIN WITHOUT SPECIFIC DEFINITION HAVE THE
MEANINGS SET FORTH IN THE DEBTOR'S FIRST AMENDED PLAN OF REORGANIZATION, DATED
FEBRUARY 4, 1997.
ARTICLE II.
SUMMARY OF DISTRIBUTIONS UNDER THE PLAN
Set forth in detail elsewhere in this Disclosure Statement is a
description of the technical aspects of the classification of Claims and
Interests, the relative allocations of property to holders of such Claims and
Interests, the methodology as to how such property is to be distributed, the
risks inherent in the proposed Plan, and the applicable bankruptcy and tax
consequences of the proposed reorganization. However, the Debtor believes that a
broad overview of what creditors and shareholders will receive under the Plan
will be helpful in your consideration of whether you wish to accept or reject
the Plan.
The Plan provides generally that creditors of the Debtor will receive
distributions as follows: (i) holders of Old Secured Notes will receive in the
aggregate (A) on account of their Allowed Secured Claims, their Pro Rata Share
of New Secured Notes having a principal face amount of $21.45 million and
approximately 60% of the New Common Stock of the Reorganized Debtor; and (B) on
account of their unsecured Deficiency Claims totalling $79.7 million, the same
treatment as is afforded to holders of General Unsecured Claims (see
subparagraph (iii) below); (ii) holders of Secured Claims that are not Claims
arising out of Old Secured Notes will receive, at the option of the Debtor: (X)
such treatment as will leave such holder unimpaired; (Y) payment in full, in
Cash; or (Z) return of such holder's collateral in the possession of the Debtor;
and (iii) holders of General Unsecured Claims against the Debtor will receive
their Pro Rata share of 450,000 shares of New Common Stock on the Effective Date
and up to 75,000 shares of New Common Stock of the Reorganized Debtor on the
Final Class 4 Distribution Date; provided, however, that Noteholders shall not
in the aggregate receive more than 80% of the New Common Stock on account of
their Allowed Secured Claims and General Unsecured Claims.
Holders of Old Common Stock of the Debtor will receive their Pro Rata
share of 50,000 shares of New Common Stock of the Reorganized Debtor. Existing
warrants, options and other rights to acquire Old Common Stock of the Debtor
(collectively, the "Old Options") will be canceled and holders of such rights
shall receive no distributions of property on account thereof.
The terms of the Plan provide for the discharge and/or release of
liability only of the Debtor, its wholly owned subsidiaries and their respective
present and former directors, officers and employees, the Indenture Trustee and
the Noteholders Steering Committee. In addition, a critical element of the Plan
is the release by the Indenture Trustee and each of the Noteholders of all of
their claims against subsidiaries of the Debtor arising out of guaranties,
pledges or otherwise, except for the treatment of their Claims provided under
the Plan.
Table I sets forth a summary of the Classes of Claims and Interests
established by the Plan. Table I is a summary only and is subject in all
respects to the specific provisions of the Plan annexed hereto as Appendix "1".
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<PAGE>
<TABLE>
<CAPTION>
TABLE I
QUICK REFERENCE GUIDE TO
CLASSIFICATIONS OF CLAIMS
AGAINST AND INTERESTS IN THE DEBTOR
-----------------------------------
<S> <C> <C> <C>
Estimate of
Class Shorthand Description Allowed Claims/Interests General Description of Class
- ----- --------------------- ------------------------ ----------------------------
Class 1 Nontax Priority Claims $8,000 Any Claim against the Debtor (other than an
Claims Administrative Expense Claim or Priority Tax Claim)
entitled to Priority Status, including, without
limitation, Prepetition Claims for wages, salaries
or commissions, and contributions to employee
benefit plans, all subject to certain limitations
as set forth in the Bankruptcy Code.
Class 2 Noteholder Secured Claims $23,500,000 Claims against the Debtor relating to the Old
Claims Secured Notes.
Class 3 Secured Claims $ 0 Any Secured Claim against the Debtor within the
Claims meaning of 506 of the Bankruptcy Code (other than as
classified elsewhere in the Plan).
Class 4 General Unsecured Claims $108,500,000(1) Any Unsecured Claim against the Debtor (other than
Claims as classified elsewhere in the Plan) arising or
accruing prior to the Filing Date.
Class 5 Old Common Stock 19,329,574 Shares All issued and outstanding shares of Old Common
Interests Stock of the Debtor.
Class 6 Old Options -- All warrants, options and rights to acquire Old
Interests Common Stock of the Debtor.
</TABLE>
- --------------------
1 Includes a claim held by Republic Corporate Services, Inc. of approximately
$22 million which is based upon a promissory note that may be avoidable
under applicable provisions of the Bankruptcy Code. See Discussion in
Section 4.6.
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<PAGE>
Table II is a summary of estimated recoveries for the different classes
under the Plan and is subject in all respects to the specific provisions of the
Plan annexed hereto as Appendix "1".
TABLE II
PROJECTED PROPERTY
DISTRIBUTIONS UNDER THE PLAN(1)
In the
The Holder of a: Allowed Amount of: Will Receive:
- ---------------- ----------------- ------------
Class 1 Claim $1,000 $1,000 in cas(2)
Class 2 Claim $1,000(3) $ 936 (consisting of $812 in New
Secured Notes and $124 in New
Common Stock)
Class 3 Claim $1,000 $1,000 in cash(4)
Class 4 Claim $1,000(3) $11.57 in New Common Stock
Class 5 Interest 1,000 shares Approximately $6.16 in New Common
Stock
Class 6 Interest --- No distributions will be made in
respect of the Old Options of the
Debtor. All such Old Options
issued and outstanding as of the
Effective Date will be canceled
- --------------------------
1 The recoveries shown in Table II are based on the following assumptions:
(a) Allowed Class 2 Claims aggregate $23.5 million; (b) the value of New
Secured Notes to be issued under the Plan is equal to 88.91% of their
principal face amount; (c) Allowed Class 4 Claims aggregate $108 million
(including $79.7 million of Deficiency Claims relating to the Old Secured
Notes); and (d) the Plan Valuation of New Common Stock is $2.38. There is
no accurance that claims will actually be allowed in the amounts assumed or
that the non-cash property distributed under the Plan will actually have
the values assumed herein. There can be no assurance that ther will be a
market for the New Common Stock or, if there is a market, that the New
Common Stock will trade at or near $2.38 per share. The $2.38 per share
price used herein assumes a reorganization enterprise value of approximately
$23.3 million. See Discussion of Enterprise Value at page 20 et. seq.
2 As an alternative to paying a holder $1,000 in cahs, the Debtor may elect
to pay a holder with deferred cash payments having a net present value
equal to $1,000, assuming the discount rate is equivalent to the Plan Rate.
3 The holder of an Old Secured Note with an original principal face amount
$1,000 would have an Allowed Class 2 Claim and Allowed Class 4 Claim for
$185 and $627, respectively.
4 As an alternative to paying a holder $1,000 in cash, the Debtor may elect,
among other options, to return all or part of such holder's collateral to
such holder.
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<PAGE>
ARTICLE III.
GENERAL BACKGROUND
3.1. Introduction. On December 23, 1996 (the "Filing Date"), the Debtor
filed a voluntary petition for reorganization under chapter 11 of the Bankruptcy
Code. The Debtor has continued in the management of its business and in the
possession of its assets as a debtor in possession pursuant to sections 1107 and
1108 of the Bankruptcy Code. A Creditors' Committee has been appointed by the
United States Trustee for the Districts of Delaware, Pennsylvania and New Jersey
(the "U.S. Trustee"). See Section 4.1, p. 11.
3.2. Executive Offices; Financial Information. The Debtor's executive
offices are currently located at Bayport One, Suite 250, 8025 Black Horse Pike,
W. Atlantic City, New Jersey 08232. Financial information regarding the Debtor
is set forth in Appendices "2" and "3" hereto, consisting of unaudited financial
statements for the quarter ended September 30, 1996 and audited financial
statements for the year ended June 30, 1996.
3.3. Capital Structure of the Debtor. The equity portion of the Debtor's
current capital structure is comprised of no par common stock (collectively, the
"Old Common Stock") and stock options and warrants granted under various stock
option agreements (collectively, the "Old Options"). The Debtor is authorized to
issue 75,000,000 shares of Old Common Stock. As of the Filing Date, 19,329,574
shares of Old Common Stock were issued and outstanding. The Debtor is authorized
to issue up to 5,000,000 shares of no par preferred stock. No shares of
preferred stock have been issued as of the Filing Date. A variety of options
have been issued to current and former officers, directors and employees which
remain outstanding. The strike price or exercise price for each of these options
exceeds the trading price of the Old Common Stock.
As of the Filing Date, the Debtor had total liabilities of approximately
$132 million, of which approximately $103 million was comprised of long-term
liabilities on account of the Old Secured Notes, approximately $22 million
comprised of a promissory note held by Republic Services Corporation1 , with the
balance being trade-related Claims.
The Debtor has two wholly-owned subsidiaries: Capital Gaming Management,
Inc. ("CGMI"), a New Jersey corporation, and Capital Development Gaming Corp.
("CDGC"), a Rhode Island corporation. The Old Secured Notes are guaranteed by
CGMI and secured by, among other things, substantially all of the assets of CGMI
and a pledge of the stock of CGMI.
3.4. Description of the Debtor's Business. The Debtor, together with its
subsidiaries, is a multi-jurisdictional gaming company with gaming interests in
Native American Tribes in several states. In addition, the Debtor has recently
disposed of its wholly-owned subsidiary, Crescent City Capital Development Corp.
("CCCDC"), a Louisiana corporation, which owned a riverboat casino utilized in
connection with a joint venture riverboat/dockside gaming facility in New
Orleans, Louisiana which ceased operations in June 1995. CCCDC owned a 50%
interest in such joint venture which was terminated in July, 1995. The
management and development of Native American gaming facilities other than the
Narragansett tribal gaming project are conducted through CGMI. The development
of the Narragansett tribal gaming project is conducted through CDGC.
Historical Information
The Debtor was organized in June 1990 and was involved in an unrelated
business segment prior to its entry into the gaming segment in 1993. From March
31, 1992 through January 20, 1993, the Debtor entered into a series of
transactions with Great American Recreation, Inc. and its wholly owned
subsidiary (collectively, "GAR") pursuant to which the Debtor sold its assets in
this unrelated business segment to GAR. With the hiring of Edward M. Tracy, who
now serves as the Debtor's President and Chief Executive Officer, in January
1993, and the hiring of other expereinced casino industry executives, the Debtor
embarked on its new strategy of pursuing opportunities in emerging markets of
the gaming industry.
- -------------------------
1 The Republic note may be avoidable under applicable provisions of the
Bankruptcy Code. See Discussion at Section 4.6, p.12.
-6-
<PAGE>
Native American Gaming Operations
CGMI was incorporated on October 24, 1978 as a wholly-owned subsidiary of
Bass Leisure Group, Inc., a wholly-owned subsidiary of Bass, PLC. CGMI operated
in the Class II gaming market, primarily providing management for high stakes
bingo facilities of certain Native American Tribes. On November 19, 1993, the
Debtor acquired all of the issued and outstanding shares of voting common stock
of CGMI for a total purchase price of $2.6 million. At the time of CGMI's
acquisition by the Debtor, CGMI was actively managing Class II gaming facilities
for the Oneida, Muckleshoot, and Cow Creek Tribes. Also, CGMI had executed
management and development contracts with the Narragansett and Jena Band of
Choctaws Tribes which were in the developmental stages. CGMI was also involved
in preliminary negotiations with regard to the execution of a Class III
management contract with the Muckleshoot Tribe. CGMI's management and
development rights and obligations with the Narragansett Tribe were subsequently
transferred to CDGC.
CGMI currently manages and operates three Native American gaming
facilities, which CGMI has developed or expanded into class III facilities:
1. Muckleshoot Contract (Muckleshoot Casino - Auburn, Washington)
(a) Current Operations. CGMI currently manages a Class III casino for
the Muckleshoot Tribe which offers over 50 table games (such as blackjack,
roulette, craps and poker), OTB and keno, in addition to non-gaming amenities
including a restaurant and giftshop. The Muckleshoot 9Casino commenced
operations on April 28, 1995. CGMI also managed a Class II high-stakes bingo
facility for the Muckleshoot Tribe until the expiration of the contract in
September 1996. The Muckleshoot Casino is located approximately 20 miles south
of Seattle and 15 miles north of Tacoma. The casino targets local residents from
the Seattle-Tacoma metropolitan area, which has approximately 2.2 million
residents. The average income per capita for the Seattle-Tacoma area is reported
to be $13,269, ranking twentieth out of 275 areas in Washington. In addition,
the casino draws residents from Portland, Oregon and Vancouver, British Columbia
which is a base of approximately 1.3 million additional potential customers.
(b) Management Contract. On April 10, 1993, CGMI signed a management
contract ("Operating Agreement") with the Tribe to construct, manage and operate
a Class III facility which would offer Las Vegas-style games including
blackjack, roulette, craps, poker, OTB, and keno. As amended in April of 1995,
the Operating Agreement is for a term of five years. Pursuant to the terms of
the Operating Agreement between the Muckleshoot Tribe and CGMI, the Tribe has
prepaid to CGMI approximately $7.5 million that was advanced for developing,
constructing and equipping the gaming facility. Under the terms of the Operating
Agreement, CGMI continues to receive an annual management fee equal to 3.9% of
gross gaming revenues.
(c) Regulatory Approvals. The Operating Agreement between CGMI and the
Tribe was approved by the National Indian Gaming Commission (the "NIGC") in
April 1995. In addition, CGMI has received a gaming license from the State of
Washington permitting CGMI to act as a manager/financier of Native American
gaming operations in the State. The Debtor also has a temporary certification by
the Tribe.
2. Tonto Apache Contract (Mazatzal Casino - Payson, Arizona).
(a) Current Operations. The Mazatzal Casino, run by the Tonto Apache
Tribe, offers 318 slot machines, keno, poker and high stakes bingo in addition
to non-gaming amenities including a restaurant, bar and giftshop. The Mazatzal
Casino commenced operations on April 27, 1995.
The casino targets both the local Payson residents and the
approximately 2.8 million people living 75 miles to the south in Phoenix and
Scottsdale, Arizona. The casino is located adjacent to the intersections of
Highways 87 and 260. In addition to the Payson area residents, the casino
attracts people from Phoenix/Scottsdale area on day trips and weekend vacations,
particularly because of the more desirable climate in Payson than those cities
during the summer months.
-7-
<PAGE>
(b) Management Contract. On June 29, 1993, CGMI signed a five year
management contract with the Tonto Apache Tribe to construct and operate a Class
III gaming facility offering slot machines, keno, high stakes bingo, non-banking
table games and off-track betting ("OTB"). The contract may be extended for two
years at the option of the Tribe and upon application to the NIGC. The
Management Contract provides for CGMI to receive a management fee of 30% of
operating profit.
(c) Regulatory Approvals. The management contract between CGMI and the
Tribe was approved by the NIGC on January 30, 1995. In addition, in February
1995, CGMI received temporary management certification from the Arizona State
Gaming Agency. The Debtor has a temporary certification by the Tribe.
3. Umatilla Contract (Wildhorse Gaming Resort - Pendleton, Oregon).
(a) Management Operations. CGMI currently manages the Wildhorse Gaming
Resort for the Umatilla Tribes which offers 300 video-lottery terminals, 800
bingo seats, and 15 table games (four of which are house-banked blackjack and
the remainder non-banking poker) in addition to non-gaming amenities including a
restaurant, bar and giftshop.
The casino targets local residents of the Tri-Cities area of Southern
Washington (Richard, Kennewick and Pasco). The casino site is accessible to a
population of 500,000 residents within a 100 mile radius that also includes
Pendleton and Walla Walla. The casino is located approximately 200 miles east of
Portland, Oregon. The Casino also targets business travelers and tourists by
attracting potential customers traveling along Interstate 84, the main east-west
free way in Northern Oregon and the location of the historic Oregon Trail.
(b) Management Contract. CGMI signed a five year contract on November
9, 1993 with the Umatilla Tribe in Pendleton, Oregon to construct, manage and
operate a Class II and Class III gaming facility. The management contract
provides for a management fee of 30% of net distributable profits after debt
service. The management contract may be extended for two years if certain
contingencies are met.
(c) Regulatory Approvals. The management contract between CGMI and the
Tribe was approved by the NIGC on August 17, 1995, and the State of Oregon has
approved the Debtor and CGMI as being suitable to manage/finance Native American
gaming operations in the State. The Debtor and CGMI are both certified by the
Tribe.
4. Narragansett Development Contract (Rhode Island). CDGC has a management
and development contract with the Narragansett Indian Tribe for the development
of a Class II and Class III gaming facility in Rhode Island. On August 24, 1994,
the Governor of the State of Rhode Island and the Narragansett Tribe entered
into a compact governing the conduct of Class III gaming by the Tribe in the
State. The compact was approved by the United States Secretary of the Interior
on December 6, 1994. Rhode Island's succeeding governor and its Attorney
General, however, challenged the validity of the compact on State Constitutional
and other grounds. On October 5, 1995, at the request of the Federal District
Court handling the challenges to the compact, the Rhode Island Supreme Court
heard oral arguments regarding the ability of former Governor Sundlun to bind
the State to the compact. The Rhode Island Supreme Court held that former
Governor Sundlun did not have the authority to bind the State to a compact; that
authority rests with the State's General Assembly. On February 13, 1996 the
United States District Court, in accepting the State Supreme Court decision,
dismissed all litigation relating to the challenge of the compact. CDGC
currently has on file a petition with the Secretary of the Interior seeking
relief under the Indian Gaming Regulatory Act as a result of the failure by
Rhode Island to negotiate a new compact in good faith. (See "Native American
Gaming Law and Regulation," infra, for a detailed description of the process of
negotiating compacts between Native American Tribes and states).
In September of 1996, federal legislation was enacted as an amendment
(introduced by U.S. Senator John Chaffee of Rhode Island) to the Omnibus
Appropriations Bill which has the effect of excluding the Narrangansett Tribe's
Settlement Act lands (where the gaming facility is currently planned to be
built) from the benefits of IGRA.
Although there can be no assurance, the Debtor believes that there is a
chance that the Chaffee amendment may be overturned in the next Congressional
session. The Tribe is also considering various litigation strategies and
lobbying efforts to overturn this legislation. In addition, the Secretary of the
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<PAGE>
Interior has requested comments as to whether the Secretary can enact
Secretarial procedures to permit gaming under IGRA for Tribes in States (such as
Rhode Island) that refuse to negotiate Tribal-State Compacts in good faith. If
the Secretary concludes that he has such authority, the Debtor believes that the
Secretary may adopt such procedures some time in 1997. On April 16, 1996, the
Narragansett Tribe filed a petition with the Secretary requesting that the
Secretary adopt procedures applicable to gaming by the Tribe. Unless the Chaffee
amendment is overturned, however, the Secretary may not have the authority to
impose a compact on the State of Rhode Island.
5. Jena Band of the Choctaws Tribe Development Contract (Louisiana).
Additionally, CGMI has a management and development contract to develop a Class
II and III facility for the Jena Band of Choctaws Tribe in Louisiana. The Tribe
has notified the Debtor that it does not consider the contract valid or
enforceable. The Debtor has and will continue to vigorously dispute such
contention and is currently engaged in discussions with the Tribe for an
amicable resolution of the dispute. There currently is no compact between the
Tribe and the State of Louisiana authorizing gaming and the State of Louisiana
has indicated a strong unwillingness to negotiate with the Tribe. Moreover, the
Tribe does not have currently a Federal Trust Land Reservation upon which to
conduct gaming operations. Obtaining a Federal Land Trust Reservation is a
timely process. Accordingly, the Debtor considers the value of this contract to
be highly speculative.
After confirmation of the Plan, the Debtor will continue its strategy to
develop CGMI's and CDGC's Native American gaming operations and to seek
additional management contracts with Native American Tribes and others based
upon its success with its Native American gaming and general casino experience.
The Debtor believes that it has significant opportunities in Native American
gaming because of its demonstrated and continued success at the existing
facilities it manages through its subsidiaries, its licensing by the National
Indian Gaming Commission and its good reputation in Indian jurisdictions. After
the Effective Date of the Plan, the Reorganized Debtor intends to focus its
efforts on maintaining its remaining gaming interests with Native American
Tribes. In tandem with its restructuring, the Company continues to pursue its
strategy to develop Native American gaming operations and to seek other gaming
opportunities in existing and emerging gaming jurisdictions. The Debtor believes
that a successful restructuring of its existing debt will be integral to its
ability to attract and develop new opportunities.
Native American Gaming Law and Regulation
Native American casino gaming has been a rapidly growing sector of the
casino gaming industry. In 1988, Congress enacted the Indian Gaming Regulatory
Act ("IGRA"). IGRA provides the framework for federal, state and Tribal control
over Native American gaming. Under IGRA, Native American Tribes must negotiate
"compacts" with their host states before certain types of gaming are allowed. If
the state does not negotiate a compact in "good faith" with the Tribe, IGRA
provides that the Tribe may sue the state in Federal Court to force the state to
negotiate. This provision, however, was recently found to be violative of the
Eleventh Amendment of the United States Constitution, which protects states with
immunity from suit in Federal Court based on sovereign immunity principles, in
the May 1996 Supreme Court decision in Seminole Tribe of Florida v. Florida.
Following the Seminole decision, the United States Secretary of the Interior
published a notice of proposed rule making in which he sought comments from all
interested parties as to how he should implement his power in view of Seminole
to arbitrate compacts between tribes and states where the state fails to
negotiate in good faith. The Secretary of the Interior is presently acting on
these comments and is expected to implement procedures based on his review of
these comments. If a state continues to resist negotiations, IGRA provides that
a court-appointed mediator will impose upon the parties either the compact
proposed by the state or the compact proposed by the Tribe. To date, at least 20
states have entered into one or more compacts which allow certain types of
gaming. All compacts between Tribes and states must be approved by the Secretary
of the United States Department of the Interior.
IGRA divides the type of games which may be played into two principal
classes, Class II gaming and Class III gaming. Class II games generally consist
of bingo, pull-tabs, lotto and, in some circumstances, poker. Class III games
generally consist of all other forms of commercial gaming, including table games
such as blackjack, craps and roulette, slot machines and video gaming, sports
betting and pari-mutuel gaming.
The NIGC is the federal regulatory agency responsible for approval and
oversight over, among other things, all Native American gaming management
contracts. Pursuant to 25 CFR Sections 535.1 and 535.2, the "modification" or
"assignment" of a management contract requires the prior approval in writing of
the NIGC. Modifications to, or assignments
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<PAGE>
of, management contracts involving changes in persons with a financial
interest in or management responsibility for a management contract that have not
been approved by the Chairman of the NIGC in accordance with IGRA and applicable
regulations are void. A "modification" of a management contract is deemed to
occur under federal law when there is a change in person(s) having direct or
indirect financial interest in the contract or having management responsibility
for the contract itself. A requested modification requires a background
investigation and subsequent suitability determination by the NIGC and a
separate background investigation and suitability determination by each Tribal
Gaming Commission and State Gaming Agency, a process which could take a year or
more.
As President and CEO of the Debtor, Edward M. Tracy, together with CGMI and
CDGC, is deemed to be the primary management official for each management and
development contract, license, certification and approval. His continued
employment by the Debtor in this role is essential both to maintain each
contract, license, certification and approval as well as to effect any
transition if one were to occur.
Moreover, each management contract has provisions requiring the consent of
the applicable Tribe in order to assign the management contract as well as
provisions requiring the Tribe's consent to certain changes in control.
Riverboat Gaming
Over the past several years a substantial portion of the Debtor's energies
and resources were focused on its CCCDC subsidiary. CCCDC held a 50% interest in
a joint venture riverboat/dockside gaming facility in New Orleans, Louisiana
(the "River City Joint Venture"). The River City Joint Venture operated a
two-vessel entertainment pavilion and docking facility for CCCDC's Crescent City
Queen riverboat and the Grand Palais riverboat in downtown New Orleans,
Louisiana. The entertainment pavilion and docking facility commenced operations
on March 29, 1995 and the Crescent City Queen riverboat commenced operations on
April 4, 1995.
As a result of the unforeseen market conditions which have been widely
reported to have severely and negatively impacted the entire New Orleans
Riverboat and land-based gaming industry which resulted in an inability of the
River City Joint Venture to meet projected revenues and the incurrence of
substantial operating losses, CCCDC ceased riverboat gaming operations in June
1995. Prior to this cessation of gaming operations, the Debtor in conjunction
with CCCDC initiated discussions with several parties to raise capital and/or to
sell the assets of River City Joint Venture. These discussions were unsuccessful
and the Crescent City Queen was unable to reopen under CCCDC's management. On
July 26, 1995, an involuntary bankruptcy petition was filed against CCCDC
seeking reorganization under chapter 11 of the Bankruptcy Code. On July 28,
1995, CCCDC consented to the entry of an order for relief whereafter CCCDC
continued to manage its business and properties as a debtor in possession.
Pursuant to a Purchase and Sale Agreement, dated July 24, 1995 (the "Mirage
Sale Agreement"), Mirage Resorts, Incorporated agreed to purchase the stock and
substantially all the assets of CCCDC under a plan of reorganization for $55
million in cash plus the assumption of certain liabilities. After termination by
Mirage of the Mirage Sale Agreement based on an assertion that there was a
failure to satisfy a condition precedent to the sale, CCCDC's management was
able to successfully negotiate and enter into a new sale agreement for the sale
of all of CCCDC's newly issued stock and substantially all of CCCDC's assets
under a plan of reorganization to a wholly-owned subsidiary of Casino Magic
Corp. (the "Casino Magic Agreement") for a purchase price of $50 million plus
the assumption of certain liabilities. On April 29, 1996, a plan of
reorganization for CCCDC (the "CCCDC Plan") was confirmed approving the Casino
Magic Agreement. In May 1996, the CCCDC Plan was consummated. The holders of the
Old Secured Notes, having a guaranty from CCCDC and a lien on substantially all
of CCCDC's assets, overwhelmingly supported the CCCDC Plan. Although the Debtor
received no direct remuneration under the CCCDC Plan, consummation of the CCCDC
Plan resulted in the receipt by the Indenture Trustee of approximately $35
million in cash and notes which was applied to amounts outstanding under the Old
Secured Notes.
3.5. Events Leading to the Debtor's Chapter 11 Filing. As a result of the
failure of the New Orleans riverboat project and the resultant bankruptcy of
CCCDC, the Debtor experienced serious liquidity difficulties. On June 13, 1995,
the Indenture Trustee for the Old Secured Notes notified the Debtor of the
occurrence of events of default under the Old Indenture. Except as limited by
the applicable provisions of the Bankruptcy Code, the holders of the Old Secured
Notes were at that time entitled to all the remedies contained in the Old
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<PAGE>
Indenture, including, but not limited to, acceleration of the Old
Secured Notes and foreclosure on the Collateral pledged by the Debtor, CGMI and
CCCDC to the Indenture Trustee which included, among other things, the Crescent
City Queen riverboat gaming vessel, other assets of CCCDC as well as the
management fees derived from the management agreements between CGMI and the
Native American Tribes.
In the event the holders of the Old Secured Notes were to have exercised
all of their available remedies under the Old Indenture and related agreements,
the Debtor and its subsidiaries would not have been able to continue their
operations. As a result, the Noteholders Steering Committee, an ad hoc committee
consisting of holders of Old Secured Notes holding a majority of the Old Secured
Notes notified the NIGC and the Debtor that the members of the Noteholders
Steering Committee would not exercise their remedies where the exercise of such
remedies would prevent CGMI from continuing its operations as manager of its
existing Native American gaming facilities and would interfere with CDGC's
development of the Narragansett project. Under certain of the Indian gaming
contracts to which CGMI or CDGC is a party, the filing of a bankruptcy petition
by or against CGMI or CDGC, as the case may be, under certain conditions, could
give the Indian Tribes party to such contracts a right to terminate. Pursuant to
the Old Indenture, the holders of a majority in aggregate principal amount of
Old Secured Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture Trustee.
The Debtor does not have the ability to generate sufficient funds to
reinstate the Debtor's payment obligations under the Old Secured Notes.
Accordingly, the Debtor entered into negotiations with the Noteholders Steering
Committee on the terms of a consensual restructuring of the Old Secured Notes.
After arduous negotiations, the Noteholders Steering Committee and the Debtor
reached agreement on a financial restructuring which is embodied in the Plan.
Currently, the cash flow of the Debtor is dependent upon Native American
Tribe Management contracts of limited duration. The Plan is intended to preserve
the value of those assets and foster future growth. This growth would provide
cash flow in perpetuity, while permitting the Reorganized Debtor to achieve a
balanced and stable cash flow beyond the term contracts presently available in
Native American gaming (See, "Native American Gaming Operations," supra, for a
description of the Debtor's objectives in this area). A crucial aspect of the
restructuring is the preservation of the Debtor's ability to maximize the value
of its assets through the continued development of existing Native American
Tribe Management contracts and the successful negotiation and execution of new
contracts. In addition to the execution of new Indian gaming contracts, the
Debtor hopes to establish itself in secondary or tertiary gaming markets with
projects of a size and scope similar to those the Debtor has developed in the
Native American gaming market. These activities cannot be successfully pursued
before the restructuring of the Debtor's liabilities is completed and CGMI is
relieved of its guaranty obligations.
3.6. Commencement of the Chapter 11 Case. On December 23, 1996, the Debtor
filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code in
the United States Bankruptcy Court for the District of New Jersey and continued
in the possession of its property and the management of its business as a
debtor-in-possession.
ARTICLE IV.
CHAPTER 11 PROCEEDINGS
4.1. Appointment of Creditors' Committee. On January 8, 1997, the U.S.
Trustee appointed the Creditors' Committee, pursuant to section 1102 of the
Bankruptcy Code, to represent the interests of unsecured creditors of the
Debtor.
The members of the Creditors' Committee are:
1. Grace Brothers Ltd.(Co-Chair)
2. Continental Casualty Co. (Co-Chair)
3. Gallagher, Briody & Butler
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<PAGE>
4. SunAmerica Life
5. DDJ Capital Management LL
6. FamCo Capital
7. ARA Urban Renewal, Inc.
The Creditors' Committee retained as its attorneys Fox, Rothschild, O'Brien
& Frankel.
The Debtor has met with the Creditors' Committee and its professional
advisors and has provided them with financial and other information which they
have requested with respect to the assets and operations of the Debtor and
certain of its affiliates. The principal elements of the Plan have been
discussed with, and reviewed by, the Creditors' Committee.
4.2. Retention of Professionals. On or about January 15, 1997, the
Bankruptcy Court approved the retention of Crummy, Del Deo, Dolan, Griffinger &
Vecchione as co-counsel to the Debtor. On or about January 31, 1997, the
Bankruptcy Court approved the retention of Willkie Farr & Gallagher as
co-counsel to the Debtor. On or about January 15, 1997, the Bankruptcy Court
approved the retention of Moore Stephens as accountant to the Debtor.
4.3. Major Developments..
Cash Collateral. The Indenture Trustee for the Old Secured Notes has a lien
on the Debtor's cash for the benefit of the Noteholders. By Order dated December
23, 1996, the Bankruptcy Court approved the use of Cash Collateral on an interim
basis with the consent of the Indenture Trustee. On January 13, 1997, the
Bankruptcy Court entered a final order authorizing the use of Cash Collateral on
an ongoing basis. This order also was consented to by the Indenture Trustee. The
Creditors' Committee indicated it had no objection to entry of the order.
Exclusivity Periods. On December 23, 1996, the Debtor filed its Plan of
Reorganization. The Debtor's exclusive period to solicit acceptances of such
plan will expire on June 23, 1997, unless extended by the Bankruptcy Court.
Transfer Motion. On January 27, 1997, First National Bank of Commerce
("FNBC") filed a motion (the "Transfer Motion") under Bankruptcy Rule 1014(b) in
the pending chapter 11 case of CCCDC seeking to transfer the Debtor's case from
New Jersey to the United States Bankruptcy Court For The Eastern District of
Louisiana (the "Louisiana Court"), where CCCDC's case is pending. By operation
of Bankruptcy Rule 1014(b) the filing of the Transfer Motion stayed any further
proceedings in the Debtor's case, pending the granting of relief from such stay
by the Louisiana Court.
At a hearing held on January 30, 1997, the Louisiana Court granted stay
relief and ordered that the Debtor's case be allowed to proceed in the New
Jersey Bankruptcy Court, pending a decision by the Louisiana Court on the merits
of the Transfer Motion.
The Louisiana Court has scheduled February 20, 1997 as the date for a
hearing to consider the Transfer Motion. If the Transfer Motion were to be
granted, the Louisiana Court would order the transfer of the Debtor's case to
the Louisiana Court. The Debtor, the Creditors' Committee and the Noteholders'
Steering Committee and the Indenture Trustee all intend to oppose the Transfer
Motion.
4.4. Plan Negotiations. Prior to the Petition Date, the Debtor entered into
discussions with the Noteholders Steering Committee regarding the framework for
a restructuring concerning the Debtor. The Noteholders Steering Committee is an
informal committee representing approximately 75% of the outstanding Old Secured
Notes. The members of the Noteholders Steering Committee are SunAmerica, Inc.,
DDJ Capital Management L.L.C., Loews Corporation and Grace Brothers, Ltd. One
of the primary focuses of the negotiations has been CGMI's guaranty of the Old
Secured Notes (the "Old Guaranty"). The Noteholders Steering Committee
recognizes that CGMI cannot become a chapter 11 debtor without jeopardizing its
valuable Indian gaming management contracts. On the other hand, since virtually
all of the value of the Debtor is the value of the Debtor's equity interest in
CGMI, a restructuring of the Debtor would not be complete without a
restructuring of the Old Guaranty. If the Noteholders were to exercise their
remedies against CGMI under the Old Guaranty, the management contracts likely
would be terminated, thus significantly reducing the value of CGMI's
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assets. Accordingly, the Debtor and the Noteholders Steering Committee have
resolved these issues in the Plan, the resolution of which is fundamental and
integral to the restructuring of the Debtor. Through the mechanism of the
releases and the Plan injunctions contained in the Plan, the Old Guaranty will
effectively be reduced on the Effective Date to the amount outstanding under the
New Secured Notes to be issued under the Plan. Additionally, the pledge of
collateral by CGMI securing the Old Secured Notes will be released to the extent
it secured the Old Secured Notes and reaffirmed to the extent it secures the New
Secured Notes. These Plan provisions will provide Noteholders with the greatest
possible recoveries and allow CGMI to continue to develop new Indian gaming
projects. Finally, these Plan provisions will allow other General Unsecured
Creditors and equity holders to receive distributions under the Plan which would
not be achievable if the Noteholders were to exercise their remedies as secured
creditors under the Old Guaranty.
It is possible that pursuant to Section 10.2 of the Indenture prior to the
amendments contemplated under the Plan (the "Old Indenture"), the holders of
66-2/3% of the outstanding Old Secured Notes may modify the Guaranty under
Article XIII of the Old Indenture. The acceptance of the Plan by 66-2/3% of the
outstanding Old Secured Notes will be deemed an agreement and consent to modify
Article XIII of the Old Indenture to render the Old Guaranty satisfied and
unenforceable upon the Effective Date.
4.5. Review of Claims. By Order dated December 23, 1996, the Bankruptcy
Court established February 16, 1997 as the Bar Date for the filing of proofs of
claim against the Debtor. Consequently, the Debtor cannot fully comply with the
provisions of Local Rule of Bankruptcy Procedure ("Local Rule") 24, which
provides, inter alia, that (a) "[a] plan proponent shall review all claims prior
to filing a disclosure statement and plan," and (b) "[a] disclosure statement
shall state the number and amount of claims of each class to which the proponent
intents to object."
Notwithstanding the ongoing filing of claims, the Debtor has complied with
Local Rule 24 to the extent possible. As of the date of approval of this
Disclosure Statement by the Bankruptcy Court, the Debtor had received and
reviewed 52 proofs of claims filed through January 30, 1997. In addition,
Schedule F -- Creditors Holding Unsecured Nonpriority Claims of the Schedules
sets forth the amounts that the Debtor believes was owing to such creditors, and
indicates those creditors whose claims are disputed by the Debtor. To the extent
that (i) a scheduled creditor files a claim in an amount that the Debtor
believes is materially higher than the undisputed amount listed on Schedule F;
(ii) a shareholder files a claim which should be classified as an interest in
the Debtor; or (iii) a creditor holding a claim scheduled as disputed files a
proof of claim on account thereof, the Debtor may object to such claim.
4.6. Preference and Other Avoidance Actions. The Debtor and Creditors'
Committee continue to review payments made by and transactions involving the
Debtor prior to the Petition Date to determine whether preference and avoidance
actions to recover estate assets should be brought. As of the date hereof, the
Debtor has identified a certain note issued to Republic Corporate Services, Inc.
in the principal amount of $19 million (the "Republic Note") as being the
subject of a possible avoidance action. Avoidance of this note effectively would
result in the disallowance of Republic's claims against the Debtor. The
Creditors' Committee has recently requested that the Debtor attempt to seek to
avoid the Republic Note and/or the obligations created thereby. Failure to
specifically identify potential avoidance actions in this Disclosure Statement
shall not be deemed a waiver of such action by the Debtor, the Creditors'
Committee or any other party.
In the 90 days prior to the Petition Date, the Debtor expended
approximately $1,127,000, excluding salaries and benefits. The Debtor and
Creditors' Committee will be reviewing these payments to determine whether any
of these payments constitute recoverable preferences and whether the bringing of
suit would result in significant recoveries in view of any defenses that may
exist. The Debtor does not believe that preference recoveries will be material.
Annexed hereto as Appendix "6" is a Schedule of Creditors and potential
creditors who received payments during the statutory preference period and may
be the subject of an action to recover preferential payments pursuant to
section 547 of the Bankruptcy Code. When voting on the Plan, each person listed
in Appendix "6" should take into account that such person may be named by the
Debtor as a defendant in a lawsuit seeking to recover a possible preference.
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ARTICLE V.
PLAN OF REORGANIZATION
5.1. Classification And Treatment Of Claims And Interests. The Claims and
Interests of creditors and shareholders of the Debtor are divided into six
Classes.
Class 1 -- Nontax Priority Claims
Class 1 Claims consist of all Claims against the Debtor arising on or prior
to the Filing Date which are entitled to Priority Status, other than Tax Claims
and Administrative Expense Claims.
Class 1 Claims may be impaired. Each holder of an Allowed Class 1 Claim
shall be paid the Allowed Amount of such Claim in full in Cash on the Effective
Date or on such other date as the Bankruptcy Court may determine, or, in the
alternative, if Class 1 Claims have accepted the Plan, the Debtor, at its
option, may elect, consistent with section 1129(a)(9)(B) of the Bankruptcy Code,
to make deferred cash payments in semi-annual installments over a three (3) year
period following the Effective Date, with interest thereon at the Plan Rate. The
Debtor estimates that, as of the Effective Date of the Plan, Class 1 Claims will
be $8,000 in the aggregate.
Class 2 -- Noteholder Secured Claims
Class 2 Claims consist of all Claims of Noteholders on account of their
ownership of Old Secured Notes to the extent such claims constitute secured
Claims under section 506 of the Bankruptcy Code ("Noteholder Secured Claims");
provided, however, that such claims shall not include any Claim arising from
rescission of a purchase or sale of Old Secured Notes. The Plan contemplates
that Noteholders hold in the aggregate Allowed Noteholder Secured Claims of
$23.5 million.
On the Effective Date, the Indenture Trustee will receive, on behalf of the
Noteholders: (a) New Secured Notes in the principal face amount of $21.45
million; and (b) 1,225,000 shares of New Common Stock of the Reorganized Debtor.
The treatment afforded Noteholders under Class 2 of the Plan is in addition
to the treatment afforded to the Noteholders' Deficiency Claim (the unsecured
portion of their Claim) which will be treated in accordance with Class 4 of the
Plan. The Debtor estimates that, as of the Effective Date of the Plan, Class 2
Claims will be $23.5 million in the aggregate.
Class 3 -- Secured Claims
Class 3 Claims consist of all Secured Claims against the Debtor other than
Noteholder Secured Claims. A Secured Claim is any Claim constituting a secured
Claim under section 506 of the Bankruptcy Code. The holder of a Claim that is
partially secured under section 506 of the Bankruptcy Code inasmuch as the
amount of the Claim exceeds the value of the property retained by the Debtor
securing such Claim, shall have a Class 3 Claim equal to the value of such
property and a Class 4 Claim for the deficiency or the difference between the
amount of such Claim and the value of the property retained by the Debtor
securing such Claim.
The Debtor believes that no Class 3 Claims have been or will be asserted.
At the Debtor's option, the Debtor will either ensure that such Claims are not
impaired in which case the holders of such Claims will be deemed to have
accepted the Plan and will not vote on the Plan or will impair any such holder
by either paying the holder's Secured Claim in full, in Cash, with interest
thereon at the Plan Rate, or reducing or eliminating such holder's Class 3
Secured Claim by distributing to any holder of such claim all or a part of the
property collateralizing such Claim. In the event the Debtor elects to
distribute to a holder of a Class 3 Claim property collateralizing a Secured
Claim, such creditor will have thirty (30) days from the date
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notification of such election is sent by the Debtor to file a Deficiency Claim
with the Bankruptcy Court. Failure to file a Deficiency Claim within such
thirty day period will result in such Deficiency Claim being forever barred.
Class 4 -- General Unsecured Claims
Class 4 Claims consist of all prepetition General Unsecured Claims against
the Debtor not separately classified elsewhere in the Plan.
Class 4 Claims are impaired. Each holder of an Allowed Class 4 Claim will
receive on the Effective Date, or such later date that a Claim becomes an
Allowed Claim, subject to Section 6.3(e) of the Plan its Pro Rata share of
450,000 shares of New Common Stock. In addition, on the Final Class 4
Distribution Date (the tenth (10th) Business Day after the last Disputed Class 4
Claim is determined by Final Order or, if there are no Disputed Class 4 Claims
on the Effective Date, the Effective Date), each holder of an Allowed Class 4
Claim will receive its Pro Rata share of shares of New Common Stock of the
Reorganized Debtor equal to 75,000 shares less the Management Additional Shares.
Notwithstanding the foregoing, the Indenture Trustee shall receive no more
than 375,000 shares of New Common Stock on account of its Allowed Class 4 Claim,
and any shares the Indenture Trustee would otherwise receive on account of its
Class 4 Claim in excess of 375,000 shares shall be distributed Pro Rata to all
other holders of Allowed Class 4 Claims.
The Debtor estimates that, as of the Effective Date of the Plan, Allowed
Class 4 Claims will amount to approximately $108* million in the aggregate. Such
Claims relate to a variety of asserted obligations of the Debtor, including
without limitation, a Deficiency Claim of the Noteholders which is deemed
Allowed in the amount of $79.5 million.
Class 5 -- Old Common Stock
Class 5 Interests consist of all Old Common Stock of the Debtor. See
Section 3.3 -- Capital Structure of the Debtor -- for a description of the
equity securities of the Debtor outstanding as of the Filing Date. Under the
Plan, holders of Class 5 Interests will receive on the Effective Date their Pro
Rata share of 50,000 shares of New Common Stock of the Debtor. Class 5 Interests
are impaired under the Plan and are entitled to vote to accept or reject the
Plan.
Class 6 -- Old Options
Class 6 Interests consist of all Old Options. Old Options consist of any
unexercised option, warrant or right to purchase Old Common Stock of the Debtor.
Under the Plan, no distributions will be made in respect of Old Options. All Old
Options will be canceled automatically on the Effective Date. While Class 6
Interests are impaired under the Plan, the holders of Class 6 Interests are not
entitled to vote to accept or reject the Plan; such holders are deemed to have
rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.
5.2. Other Terms of the Plan.
Effective Date
The Plan will be consummated and become effective on a Business Day not
more than five (5) Business Days after all conditions to consummation under
Section 10.02 of the Plan (including, without limitation, that the Confirmation
Order shall have become a Final Order) have been satisfied or waived pursuant to
the Plan. See "Conditions Precedent to Confirmation and Effective Date of Plan,"
below.
Surrender of Notes and Other Securities
Except as otherwise ordered by the Bankruptcy Court, in order to
receive any distribution under the Plan, each holder of a Noteholder Claim will
be required to surrender all of its Old Secured Notes to the Indenture Trustee.
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* This estimate includes the claim of Republic Corproate Services, Inc. at its
asserted amount of approximately $22 million. This claim may be subject to
avoidance and/or object.
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<PAGE>
Failure to comply with such requirements will bar a Noteholder from receiving
any distributions under the Plan. Notwithstanding the foregoing, all of the Old
Secured Notes will be deemed surrendered, canceled and of no further force or
effect as of the Effective Date, whether or not the Old Secured Notes are
delivered to the Indenture Trustee. Delivery of the Old Secured Notes is
required for administrative convenience only and any such delivery shall not
alter a Noteholder's legal or equitable interests, if any.
The Plan provides further that, to the extent that any Allowed Class 4
Claim or Class 5 Interest is evidenced by a note, other similar evidence of
indebtedness or Old Common Stock, the holder of such Claim or Interest shall not
be entitled to any distribution under the Plan unless and until such holder has
surrendered its note, other similar evidence of indebtedness or Old Common
Stock.
To obtain distributions under the Plan, a holder of a Claim or Interest
based on any such security (i.e., Old Secured Notes, similar evidence of
indebtedness or Old Common Stock) shall have first surrendered, or caused to be
surrendered, to the Indenture Trustee (in the case of the Old Secured Notes) or
the Debtor (in the case of other securities) the original such security held by
it or, in the event that such original security shall have been lost, destroyed,
stolen or mutilated, executed and delivered an affidavit of loss and indemnity
with respect thereto in form customarily utilized for such purposes that is
reasonably satisfactory to the Indenture Trustee and the Debtor (in the case of
the Old Secured Notes) or the Debtor (in the case of other securities) and, in
the event the Indenture Trustee or the Debtor (in the case of the Old Secured
Notes or the Debtor in the case of other securities) so requested, furnished a
bond in form and substance (including, without limitation, amount) reasonably
satisfactory to the Debtor and in the case of the Old Secured Notes, the Debtor
and the Indenture Trustee.
The manner and procedure to be followed for surrendering Old Secured Notes
and for providing necessary affidavits and bonds shall be prescribed by the
Indenture Trustee pursuant to the Old Indenture, or otherwise upon reasonable
notice sent to all holders of Class 2 Claims.
The manner and procedure to be followed for surrendering Old Common Stock
and for providing necessary affidavits and bonds shall be prescribed by the
Debtor or any appropriate transfer agent upon reasonable notice sent to all
record holders of Old Common Stock.
The Plan provides that as of the close of business on a record date to be
determined by the Bankruptcy Court (the "Debt Record Date"), the transfer
ledgers for the Old Secured Note shall be closed, and there shall be no further
changes in the record holders of such securities. The Debtor and the Indenture
Trustee shall have no obligation to recognize any transfer of any of the Old
Secured Notes occurring on or after the Debt Record Date. The Debtor and the
Indenture Trustee shall be entitled instead to recognize and deal for all
purposes hereunder with only those record holders stated on the transfer ledgers
of the Indenture Trustee as of the close of business on the Debt Record Date.
The Plan provides that as of the close of business on a record date to be
determined by the Bankruptcy Court (the "Stock Record Date"), the transfer
ledgers for the Old Common Stock shall be closed, and there shall be no further
changes in the record holders of such securities. The Debtor shall have no
obligation to recognize any transfer of any of the Old Common Stock occurring on
or after the Stock Record Date. The Debtor shall be entitled instead to
recognize and deal for all purposes hereunder with only those record holders
stated on the transfer ledgers of the Stock Transfer Agent as of the close of
business on the Stock Record Date.
DO NOT RETURN YOUR OLD SECURED NOTES, OTHER EVIDENCE OF INDEBTEDNESS OR OLD
COMMON STOCK WITH YOUR BALLOT.
Filing Claims
Pursuant to the local rules of bankruptcy practice for the Bankruptcy
Court, the Bankruptcy Court fixed February 16, 1997 as the final date for filing
proofs of claim for claims of any kind or character in connection with the
chapter 11 case (the "General Bar Date"). Under the terms of the Old Indenture,
Class 2 and Class 4 Claims for amounts of principal and interest due in respect
of the Old Secured Notes, will be filed by the Indenture Trustee. Accordingly,
individual owners of any of these securities need not file proofs of claim in
respect of such amounts.
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If your Claim is not listed in the Schedules of Assets and Liabilities
filed with the Bankruptcy Court by the Debtor (the "Schedules") or is listed
therein as disputed, unliquidated or contingent and you filed a proof of claim,
or if you filed a proof of claim in an amount larger than the amount of your
Claim listed in the Schedules, then an objection to your Claim may be filed.
Unless additional time is granted by Order of the Bankruptcy Court, all
objections to Claims or Interests must be filed prior to sixty (60) days after
the Confirmation Date. The objecting party will be the Debtor or Reorganized
Debtor, as the case may be, unless the Bankruptcy Court shall authorize another
party-in-interest to file an objection. Any objecting party shall serve a copy
of each objection upon the holder of the Claim or Interest to which it pertains,
upon the Debtor or Reorganized Debtor, as the case may be, and upon counsel to
the Debtor and the Creditors' Committee. To the extent the existence of Disputed
Claims would hinder or delay confirmation of the Plan, the Debtor reserves its
rights under section 502(c) of the Bankruptcy Code to have one or more Disputed
Claims estimated by the Court.
Executory Contracts
The Plan provides that, subject to the requirements of section 365 of
the Bankruptcy Code, all executory contracts or unexpired leases of the Debtor
that have not been assumed by order of the Bankruptcy Court, are not the subject
of a motion to assume pending on the Confirmation Date or are not listed on the
Schedule of Assumed Executory Contracts annexed hereto as Exhibit "D" shall be
deemed rejected by the Reorganized Debtor on the Effective Date.
Unclaimed Distributions Under the Plan
Except as otherwise provided in the Plan, the Plan provides that if any
Person entitled to receive amounts of Cash or other property under the Plan has
not, within two years after the Effective Date, provided the Debtor with the
documents required by Sections 6.2 and/or 6.3 of the Plan or accepted receipt of
such Cash or other property, such Person shall be deemed to have no further
Claim against the Debtor and shall not participate in any distribution under the
Plan in respect of such Claim. Nothing contained in the Plan requires the Debtor
or Reorganized Debtor to attempt to locate any such Person.
Each creditor should check the address to which this Disclosure
Statement was sent to ensure that it is a correct, current address. If this
Disclosure Statement was forwarded by a record holder in respect of securities
held for the benefit of another Person, such other Person may wish to send a
change of address to the Debtor in accordance with instructions that will be
contained in a notice distributed to creditors following Confirmation of the
Plan.
Rounding
Whenever any payment of a fraction of a cent would otherwise be called
for, the actual payment shall reflect a rounding of such fraction to the nearest
whole cent, with one-half cent being rounded up to the nearest whole cent. To
the extent Cash remains undistributed as a result of the rounding of such
fraction to the nearest whole cent, such Cash shall be treated as unclaimed cash
under Section 12.8 of the Plan. Whenever any distribution of a fraction of a
share of New Common Stock would otherwise be called for, the actual distribution
will reflect a rounding of such fraction down to the nearest whole number of
shares. Whole shares of New Common Stock not distributed because of the
provisions of this Section will be treated as unclaimed securities under Section
12.8 of the Plan. In addition, any amount of New Senior Notes issuable upon
confirmation in denominations below $1,000 will be retained by the Indenture
Trustee and will be aggregated and sold in the market for the account and risk
of the holders pro rata, with the case proceeds net of expenses being
distributed to the holders of such interest; provided, however, that holders may
elect by notice to the Indenture Trustee to receive New Secured Notes in a
denomination below $1,000.
Conditions Precedent to Confirmation and Effective Date of Plan
Confirmation of the Plan is conditioned upon the occurrence of numerous
transactions and events. Unless waived, the non-satisfaction of a condition will
make confirmation of the Plan impossible. However, certain of such conditions
may be waived by the Debtor pursuant to Section 10.3 of the Plan. The following
are conditions precedent to Confirmation of the Plan:
(a) the Confirmation Order shall be in form and substance
reasonably satisfactory to the Debtor and the Noteholder Steering
Committee; and
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<PAGE>
(b) the Debtor has extended the terms of the Key Employees'
employment agreements with the Debtor for three (3) years from the
Effective Date.
The Debtor now believes that each of the conditions to Confirmation
contained in the Plan can or will be satisfied or otherwise waived in accordance
with the terms of the Plan. The occurrence of such satisfaction or waiver is,
however, dependent upon a variety of facts and circumstances, some of which are
beyond the control of the Debtor. Thus, there can be no assurance that such
conditions will be satisfied, or if not so satisfied, will be waived as provided
by the Plan.
In addition, section 1129 of the Bankruptcy Code contains a list of
requirements which must be met before a plan may be confirmed. The Debtor now
believes that each of these requirements can and will be satisfied.
The effectiveness of the Plan is also conditioned upon the occurrence
of a number of transactions and events. Unless waived, the non-satisfaction of a
condition will make consummation of the Plan impossible. However, each of such
conditions may be waived by the Debtor pursuant to Section 10.03 of the Plan.
Consummation of the Plan is conditioned upon the Confirmation Order becoming a
Final Order.
The Debtor now believes that each of the conditions to consummation
contained in the Plan can or will be satisfied or otherwise waived in accordance
with the terms of the Plan. As described above, however, the occurrence of such
satisfaction or waiver is, however, dependent upon a variety of facts and
circumstances, some of which are beyond the control of the Debtor. Thus, there
can be no assurance that such conditions to consummation of the Plan will be
satisfied, or if not so satisfied, will be waived as provided by the Plan.
Miscellaneous Provisions of the Plan
Discharge. The Code and the Plan provide that (except as otherwise
provided in the Confirmation Order) upon the Effective Date, the Debtor (and
only the Debtor) shall be discharged and released from any further liability for
all Claims that arose prior to the Plan's Confirmation.
Releases. The Plan provides that, except as otherwise expressly
provided in the Plan or the Confirmation Order, on the Effective Date, the
Covered Persons are released from any and all claims or liabilities (including
claims by the Debtor), other than claims arising from willful misconduct, gross
negligence or defalcation and Joint Trade Claims, arising from actions taken in
their capacity as such, and from any and all Claims, obligations, rights, causes
of action and liabilities which any holder of a Claim against or Interest in the
Debtor may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising based in whole or in part upon any act
or omission, transaction or other occurrence taking place on or before the
Effective Date in any way relating to the Debtor, the Chapter 11 Case, or the
Plan, including, without limitation, any Claims of equitable subordination or
similar assertions (together, the "Released Claims"). For the purposes of this
release, the term "Covered Person" means the Debtor and each of its wholly owned
subsidiaries, together with their respective present and former directors,
officers and employees.
The Plan provides that, except as otherwise expressly provided herein
or in the Confirmation Order, on the Effective Date, each holder of any Claim
against the Debtor receiving, or entitled to receive, payments or distributions
pursuant to the Plan on account of such Claim, shall be deemed to have forever
waived, released and discharged all rights, causes of action and claims, in law
or in equity, whether based on tort, fraud, contract or otherwise, which they
heretofore or hereafter possessed or may possess against any Covered Person
arising in any manner from (i) the issuance, offering or sale of any interest in
any of the Old Secured Notes or the amendment of any term of the Old Indenture,
(ii) the disclosure made by any Covered Person in any document used in
connection with the issuance, offering or sale of any interest in any of the Old
Secured Notes, or the amendment of any term of the Old Indenture, (iii) the due
diligence undertaken by any Covered Person in connection with the issuance,
offering and sale of any interest in any of the Old Secured Notes or the
amendment of any term of the Old Indenture, or (iv) as against any Covered
Person, such holder's acquisition, ownership or disposition of any interest in
any of the Old Secured Notes (together, the "Released Claims"). From and after
the Effective Date, any
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such right, cause of action or Claim against any Covered Person shall, without
the necessity for any further action by, or notice to, any holder, automatically
be relinquished, conceded, extinguished, canceled and terminated as a result of
the waiver, release and discharge contained in Section 9.3 of the Plan and the
Confirmation Order shall provide that such holders, with respect to any such
rights, causes of action and Claims, will be permanently enjoined on and after
the Effective Date from acting or proceeding in any manner, including without
limitation, commencing, conducting or continuing in any manner, directly or
indirectly any suit, action or proceeding of any kind (including, without
limitation, any thereof in a judicial, arbitral, administrative or other forum
against any Covered Person) in derogation of the release contemplated by
paragraph 9.3 of the Plan, provided that the foregoing, solely as to any Covered
Person, may be subject to review by the court having jurisdiction in respect of
such proceeding.
Subject to exceptions relating to conduct constituting gross negligence
or willful misconduct, the Plan also contains certain exculpatory provisions
regarding conduct by the Debtor, the Reorganized Debtor, any Creditors'
Committee, any of the members of such committee, any of their respective
officers, directors, employees or agents (acting in such capacity), and any
professional persons employed by any of them for any action taken or omitted to
be taken in connection with or related to the formulation, preparation,
dissemination, implementation, confirmation or consummation of the Plan, this
Disclosure Statement, or any contract, release, or other agreement or document
created or entered into, or any other action taken or omitted to be taken in
connection with the Plan.
In consideration for, among other things, the guaranty by the Guarantor
of the New Secured Notes and the pledge of collateral securing the payment by
the Reorganized Debtor of all obligations under the New Secured Notes, each
Noteholder, and its transferees, successors and assignees will be deemed to have
forever waived, released and discharged all rights, causes of action and claims,
in law or in equity, against the Guarantor arising out of the Old Guaranty or
the Old Secured Notes.
Injunctions. Except as otherwise expressly provided in the Plan, the
Confirmation Order will provide that, following the Effective Date, all Persons
who have held, hold or may hold Claims or Interests are, with respect to any
such Claim or Interest, will be permanently enjoined on and after the Effective
Date from: (a) commencing, conducting or continuing in any manner any suit,
action or other proceeding of any kind (including, without limitation, any
thereof in a judicial, arbitral, administrative or other forum) against the
Debtor or Reorganized Debtor, any of its property, or any direct or indirect
transferee of any property of, or direct or indirect successor in interest to,
any of the foregoing Persons, or any property of any such transferee or
successor, (b) enforcing, levying, attaching (including, without limitation, any
pre-judgment attachment), collecting or otherwise recovering by any manner or
means, of any judgment, award, decree or order against the Debtor or Reorganized
Debtor, any of its property, or any direct or indirect transferee of any
property of, or direct or indirect successor in interest to, any of the
foregoing, or any property of any such transferee or successor, (c) creating,
perfecting or otherwise enforcing in any manner, directly or indirectly, any
encumbrance of any kind against the Debtor or Reorganized Debtor, any of its
property, or any direct or indirect transferee of any property of, or successor
in interest to, any of the foregoing, (d) asserting any setoff, right of
subrogation or recoupment of any kind, directly or indirectly, against any
obligation due the Debtor or Reorganized Debtor, any of the property of the
Debtor or the Reorganized Debtor, or any direct or indirect transferee of any
property of, or successor in interest to, any of the foregoing, or (e) acting or
proceeding in any manner, in any place whatsoever, that does not conform to or
comply with the provisions of the Plan and the Confirmation Order.
Notwithstanding anything in the Plan to the contrary, nothing in Paragraph 9.4
of the Plan or elsewhere in the Plan shall in any way affect or impair any
rights or causes of action against any Person other than any Covered Person.
Upon the Effective Date, all Noteholders and their respective transferees,
successors and assigns will be permanently enjoined from commencing, conducting
or continuing in any manner whatsoever any action to recover from the Guarantor
any amounts owing under the Old Guaranty or the Old Secured Notes.
Indemnification. To facilitate the expeditious and effective
reorganization of the Debtor through the Plan, the Reorganized Debtor will
indemnify, hold harmless and reimburse any present and former director, officer
or employee pursuant to the provisions of its certificate of incorporation and
by-laws and applicable provisions of the laws of New Jersey from and against any
and all losses, claims, damages, liabilities and actions asserted or filed
against such persons for, by reason of, arising from, in connection with,
involving, or related to services rendered or acts or omissions to act in those
capacities relating to or arising out of the facts and claims alleged or
asserted, or which could have been alleged or asserted prior to the Confirmation
Date. The indemnification provisions of the Plan shall not apply to claims and
liabilities asserted and found by a court of competent jurisdiction to arise
from gross negligence, willful misconduct or defalcation by the Person seeking
indemnification. The indemnifications provided under the Plan will survive
confirmation of the Plan and shall not be discharged pursuant to section 1141 of
the Bankruptcy Code. The Reorganized Debtor will be obligated to pay any legal
or
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other expenses reasonably incurred by such indemnified party in connection
with this indemnification provision or the enforcement thereof.
Retention of Jurisdiction. The Plan provides that notwithstanding
confirmation of the Plan or the occurrence of the Effective Date, the Bankruptcy
Court shall retain jurisdiction of the chapter 11 case for certain purposes,
including, without limitation, (a) to determine the Allowed Amount of Disputed
Claims; (b) to resolve controversies and disputes regarding interpretation and
implementation of the Plan, including, without limitation, the determination of
the status of any contract of the Debtor claimed by any Person to constitute an
executory contract as of the Filing Date and the resolution of any disputes
concerning whether any Person had sufficient notice of the chapter 11 case, any
applicable claims bar date, the hearing on the approval of the Disclosure
Statement as containing adequate information, the hearing on the confirmation of
the Plan for the purpose of determining whether a Claim or Interest is
discharged thereunder or for any other purpose; (c) to enter orders in aid of
the Plan, including, without limitation, appropriate orders (which may include
contempt or other sanctions) to protect the Debtor and Reorganized Debtor; (d)
to modify the Plan or remedy any apparent defect or omission in the Plan; (e) to
determine any and all applications, objections to claims, adversary proceedings
and contested or litigated matters pending on the Confirmation Date or as filed
pursuant to the Bankruptcy Code or order of the Bankruptcy Court, including,
without limitation, proceedings and matters filed subsequent to the Confirmation
Date that could have been filed prior to the Confirmation Date and which are
authorized to be brought under section 1123(b) of the Bankruptcy Code; and (f)
to allow, disallow, estimate, liquidate or determine any Claim and to enter or
enforce any order requiring the filing of any such Claim before a particular
date.
Trading Restrictions. The New Common Stock issued under the Plan may be
subject to certain restrictions on transfer. In addition to restrictions on
trading under applicable securities laws, additional restrictions are set forth
in Section 9.6(a) of the Plan.
Registration Rights. Upon request of either the Advisory Committee or
an original holder of any restricted New Secured Notes or New Common Stock
issued pursuant to the Plan, the Reorganized Debtor will cause a registration
statement to be filed no later than 120 days after such request pursuant to Rule
415 of the Securities Act of 1933. Thereafter, the Reorganized Debtor will use
its best efforts to cause such registration statement to be declared effective
and to keep such registration statement continually effective for 18 months
thereafter.
5.3. Financing Arrangements. Cash distributions under the Plan will be
financed out of Cash generated from the operations of the Debtor and its
subsidiaries. The Debtor does not currently intend to seek additional financing
for purposes of making distributions under the Plan. After the Effective Date,
however, the Debtor and is subsidiaries most likely will seek outside sources of
funds to finance ongoing development projects and future expansion.
5.4. Methodology Used By Debtor In Arriving At Certain Assumed Values.
Enterprise Value and Reorganization Equity Value
The Debtor believes that the value of the Reorganized Debtor, on a debt-free
basis, as of the Effective Date (the "Enterprise Value") is $23.32 million,
based upon advice from, and consultation with, the Debtor's financial advisors
regarding ranges of enterprise values. The Debtor provided its financial
advisors with cash flow projections for the post-confirmation operation of the
Debtor's business. (See cash flow projections for Cases A, B and C
(collectively, the "Scenarios") annexed as Appendix 4.) Due to the uncertainty
surrounding the CDGC Naragansett project and the ability of the Debtor's
management to attract and enter into new management agreements, there is a
significant difference among the various cash flow projections. The financial
advisors determined that the appropriate valuation methodology was to discount
the projected future cash flows in each of the three Scenarios, producing a
range of Enterprise Values from $19 million (Case A) to $31 million (Case C).
Based upon their knowledge and experience in the gaming business generally,
their familiarity with the Debtor's business and the Debtor's description of its
contracts, the financial advisors determined that each Scenario required
application of varying discount rates to reflect, among other things, the
inherent risks in realizing each of the assumptions underlying the Scenarios.
Scenario A (the Stub Company) has less inherent risk than Scenarios B and C
because it is the only Scenario based solely upon existing contracts for which
historical cash flows and data exist. Scenarios B and C are inherently riskier
than Scenario A due to, among other things, regulatory and legal hurdles to
obtaining a management contract, as well as uncertainty
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regarding the achievability of projections for which there is neither historical
experience nor comparable market data. Of the three Scenarios, the financial
advisors believe that Scenario C -- involving development of a Naragansett
casino -- is the least likely to occur.
The financial advisors derived the implied equity value of the Reorganized
Debtor on the Effective Date (the "Reorganized Equity Value") by calculating the
mathematical difference between Enterprise Value and the Reorganized Debtor's
"Net Debt" as of the Effective Date. "Net Debt," as used herein, means the
aggregate amount of the Reorganized Debtor's long-term debt (consisting
principally of the New Secured Notes to be issued under the Plan), less the
Debtor's excess cash balances, on the Effective Date. Based on the Debtor's
projections, the financial advisors assumed that such excess cash balances would
be $1 million. While the principal face amount of the New Secured Notes is $22
million, the value at which such notes must be recorded on the Debtor's books
pursuant to GAAP is less than $22 million because the New Secured Notes will
neither pay nor accrue interest during the first year after their issuance. The
financial advisors have determined that the New Secured Notes should be recorded
at $19.56 million on the debtor's books. Based on the foregoing, the financial
advisors computed that Net Debt is $18.56 million and, accordingly, the implied
Reorganization Equity Value of the Reorganized Debtor ranges from approximately
$0.44 million ($19 million less $18.56 million) to $12.44 million ($31 million
less $18.56 million). The Debtor, based upon its belief that Enterprise Value
will be $23.32 million, believes that implied Reorganization Equity Value will
be approximately $4.76 million.
The Plan contemplates the issuance of 2 million shares of New Common
Stock. Utilizing the Debtor's Reorganized Equity Value of $4.76 million, the
Debtor has calculated the per share value of the New Common Stock to be $2.38.
The following table summarizes certain of the calculations made above.
CALCULATION OF PER SHARE
VALUE OF NEW COMMON STOCK
DEBTOR'S ESTIMATE OF ENTERPRISE VALUE $23,320,000
REORGANIZATION DEBT $22,000,000
(NEW SECURED NOTES AT
FACE VALUE)
(LESS DISCOUNT) $(2,440,000)
LESS BOOK VALUE OF REORGANIZATION DEBT $(19,560,000)
PLUS ESTIMATED STARTING EXCESS CASH BALANCES
$ 1,000,000
REORGANIZED EQUITY VALUE $ 4,760,000
PER SHARE REORGANIZED EQUITY VALUE BASED ON
ISSUANCE OF 2 MILLION SHARES OF NEW COMMON STOCK $ 2.38
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Calculation of Claims of Noteholders
As of the Filing Date, the Debtor was indebted to the Noteholders for
principal and interest due under the Notes aggregating $103,200,000 (the
"Noteholders' Claim"). The Noteholders' Claim has been calculated as follows:
Date Description Amount
---- ----------- ------
February 17, 1994 Notes Issued $135,000,000
March 30, 1995 Equity For Debt Swap $ (8,000,000)
$127,000,000
2/1/95 -- 6/30/96 Interest Payments $ 20,692,873
7/1/96 -- 7/29/96 Interest Payment $ 1,176,514
July 29, 1996 Total Indebtness before Payment Date $148,869,387
July 30, 1996 Distribution of Cash Under Crescent
City Plan and Proceeds from Cash in
Trust ($ 49,986,000)
July 30, 1996 Total Indebtedness after Payment
Date $ 98,883,387
December 23, 1996 Interest Accrued from August 1,
1996 through December 22, 1996
$ 4,316,612
December 23, 1996 Total Noteholder Claim $103,200,000
The Indenture Trustee calculates the Noteholders' claim as follows:
First Trust National Association
Proof of Claim Calc: Capital Gaming International
Last Coupon 2-1-95
Coupon Rate 11.5%
Basis 360 days
Original Principal $135,000,000
Debtor Holds ($8,000,000)
Net Outstanding $127,000,000
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Days Amount Balance
---- ------ -------
8-1-95 Int Due 180 $7,302,500 $134,302,500
2-1-96 Int Due 180 $7,722,394 $142,024,894
7-26-96 Int Due 176 $7,984,955 $150,009,849
7-26-96 Payment ($49,986,000) $100,023,849
12-23-96 Int Due 146 $4,665,001 $104,688,850
Total Due $104,688,850
The Debtor has calculated the Noteholders' Claim to be $103,200,000.
The Indenture Trustee calculates the Noteholders' Claim to be $104,688,850. The
discrepancy arises from the technical calculation of accrued interest. The
calculation of interest will be resolved prior to confirmation of the Plan. The
Noteholders' Claim shall be allowed in an amount of no less than $103,200,000
and no more than $104,688,850. If the Noteholders' Claim is $104,688,850, the
economic impact should not be significant.
As collateral for the Noteholder Claim, the Indenture Trustee continues
to hold a security interest in and lien on (i) substantially all of the assets
of the Debtor,* including, without limitation, the shares of CGMI owned by CGI,
and (ii) all of the assets of CGMI. The Debtor and the Creditors' Committee and
their respective counsel have reviewed the liens asserted by the Indenture
Trustee and have preliminarily concluded that such liens are valid, perfected
and unavoidable as to all assets of the Debtor other than as to the Debtor's
shares of CDGC and as to an intercompany loan receivable of $350,000 due to the
Debtor from CDGC, which is represented by a note.
The Noteholders' Secured Claim is equal to the going concern value of
the Debtor's property in which Noteholders have a security interest. The
Noteholders' Secured Claim is therefore equal to: (a) the value of CGMI (b) cash
of the Debtor, plus (c) the value of the Debtor's other assets, particularly
intercompany advances made by the Debtor to CDGC.
(a) Value of CGMI. The Noteholders are entitled under their
security agreements to all of the cash flow generated by CGMI. The Debtor has
provided its financial advisors with its projections of the net cash flow to be
generated by CGMI under its existing management agreements with Native American
tribes. Based upon such projections, the financial advisors have valued CGMI at
approximately $20.725 million.
(b) Cash Collateral. The Indenture Trustee holds or otherwise
has a lien on approximately $1,500,000 in cash consisting of (i) the $500,000
escrow fund held in connection with the sale of CCCDC to an affiliate of Casino
Magic Corporation (see discussion at Section 4.3), plus (ii) the sum of
approximately $1,000,000 which the Debtor has projected will be on hand on the
Effective Date, which represents cash proceeds of management agreements owned by
CGMI, which are subject to the Indenture Trustee's liens.
[FN]
_______________________________
* The only property of the Debtor against which the Noteholders do not
have a lien, are the Debtor's shares of CDGC. The Debtor believes that the
Indenture Trustee was not granted a lien on such shares. However, the Indenture
Trustee and Noteholders Steering Committee claim a lien on the Narragansett
contract as well as a lien on all intercompany receivables due from CDGC.
Nevertheless, since the shares of CDGC were not held by the Indenture Trustee on
the Petition Date, it is likely that even if the Indenture Trustee had a lien on
such shares, such lien would be unperfected and could be avoidable under
applicable provisions of the Bankruptcy Code. In any event, the Debtor believes
that based on existing legislation in Rhode Island (see discussion at Section
4.3), the value of CDGC is unlikely to exceed the aggregate amount of CDGC's
indebtedness (which the Debtor believes is at least $2.5 million) and that
consequently, the shares of CDGC have no value at the present time.
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(c) Other Assets. The only other asset which may have any material
value are loans receivable created by cash advances by the Debtor to CDGC. As of
the Petition Date, CDGC owed the Debtor $2.3 million. All of such indebtedness
(other than $350,000 represented by a note which was not delivered to the
Indenture Trustee) is subject to the lien of the Indenture Trustee. For the
purposes of this Disclosure Statement, the Debtor has presumed that such amounts
are collectible in full. (To the extent that CDGC might be determined to have a
value in excess of $2.3 million, the Noteholders have asserted that such excess
value is subject to their lien under various legal theories.)
(d) Noteholders' Secured Claim. Based upon the foregoing, the Debtor
believes that the Noteholders' Secured Claim is at least $23.5 million. For the
purposes of this Plan, the Debtor and Noteholders Steering Committee have agreed
to the allowance of the Noteholders' Secured Claim for $23.5 million.
(e) Noteholders' Deficiency Claim. The Noteholders' Deficiency Claim is
equal to $79.7 million, that being the mathematical difference between the total
Noteholder Claim of $103.2 million and the Noteholders' Secured Claim of $23.5
million.
ARTICLE VI.
BOARD OF DIRECTORS AND MANAGEMENT
OF THE REORGANIZED DEBTOR
6.1. Post-Confirmation Management. As of the Effective Date, the Board
of Directors of the Reorganized Debtor shall consist of a minimum of three and a
maximum of seven members. It is anticipated that the members of the initial
Board of Directors of the Reorganized Debtor and the senior officers thereof
after the Effective Date shall include the following persons:
Name Position
---- --------
Edward M. Tracy Director; President and Chief Executive
Officer
Col. Clinton L. Pagano Director; Executive Vice President of
Compliance
William S. Papazian Senior Vice President, Secretary and
General Counsel
Cory H. Morowitz Acting Chief Financial Officer
On or before the Confirmation Date, the Noteholder Steering Committee
will designate four persons to serve on the Board of Directors of the
Reorganized Debtor. The Reorganized Debtor and the Noteholder Steering Committee
designees will use their best efforts to seek the appropriate licensing to allow
the Noteholder Steering Committee designees to serve on the Board of Directors.
Once licensed, the Noteholder designees shall be added to the Board of
Directors.
Except with the consent of the majority of the Board of Directors, each
of the Noteholder Steering Committee designees must meet the following minimum
qualifications or will be disqualified from service on the Board of Directors of
the Reorganized Debtor:
1. The new designee may not beneficially own or control, now, during
the prior five (5) years or at any time during service on the Board of
Directors, 1% or more of the outstanding debt or equity securities of any entity
engaged in the gaming industry;
2. The designee may not serve, now, at any time during the prior five
(5) years or at any time during service on the Board of Directors, as an
officer, director or agent of any entity engaged in the gaming industry;
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3. The designee may not have any conflict of interest that would impair
such designee's ability to serve fairly and impartially; and
4. The designee generally shall be of good character and reputation.
The Amended Indenture provides that until the designees of the
Noteholder Steering Committee become licensed and are added to the Board of
Directors or the New Secured Notes are satisfied in full, there shall be an
Advisory Committee (as defined in the Amended Indenture) that shall have rights
to approve certain transactions entered into by the Reorganized Debtor. On or
before the Confirmation Date, the Noteholders Steering Committee shall
designate, subject to Bankruptcy Court approval, those individuals who will
serve on the Advisory Committee. The Advisory Committee will also be empowered
under the Amended Indenture to waive certain covenants by the Reorganized Debtor
therein.
The following information is provided in respect of the senior
management and members of the Board of Directors of the Reorganized Debtor:
Edward M. Tracy (44) is the Primary Management Official with respect to
each management contract and Federal, state and tribal license pursuant to which
the Debtor operates. Mr. Tracy is one of the few casino executives in the
industry who possesses both casino management and development expertise as well
as the integrity and licensability required for obtaining, developing and
maintaining the Debtor's management contracts. He has been instrumental in
obtaining and maintaining the Debtor's management and development contract with
the Narragansett Tribe. Mr. Tracy was appointed President and Chief Operating
Officer and a Director of the Company on January 7, 1993, and he became Chief
Executive Officer on May 30, 1995. From April 1991 until January 1993, Mr. Tracy
was President of Casino Management, Inc., a casino management consulting
company. From February 19, 1990 to April 1991, Mr. Tracy was President and Chief
Executive Officer for The Trump Organization which includes Trump Plaza, Trump
Castle, Trump Regency and Trump Taj Mahal Casinos in Atlantic City, New Jersey.
He served as President and Chief Operating Officer for Trump Castle from May
1989 to February 1990. From November 1986 to May 1989, Mr. Tracy was Vice
President and General Manager of the Sands Hotel and Casino in San Juan, Puerto
Rico. Mr Tracy has been employed in the gaming and hospitality business for 18
years. In addition to other contractual benefits, Mr. Tracy's employment
agreement provides for an annual base salary of $495,000.
William S. Papazian (34) was appointed Senior Vice President, General
Counsel and Corporate Secretary of the Company on May 23, 1994 and he became
Senior Vice President on June 17, 1995. Prior to that, he maintained a gaming,
corporate and securities practice and represented the Debtor as an attorney with
the firm of Mason, Briody, Gallagher & Taylor in Princeton, New Jersey. Mr.
Papazian has also served as Associate General Counsel to Mercy Medical Center in
New York, New York and has practiced corporate law with the firm of Farrell,
Fritz, Caemmerer, Cleary, Barnosky & Amentano in Uniondale, New York. Mr.
Papazian has been practicing corporate and regulatory law since 1986, and is
admitted to the bar in the States of New Jersey, California, New York and
Pennsylvania. Mr. Papazian is a recognized expert in Native American gaming law
and regulation and is also highly experienced in other aspects of gaming law and
regulation. He is admitted to practice law in New York, New Jersey, California
and Pennsylvania. In addition to other contractual benefits, Mr. Papazian's
employment agreement provides for an annual base salary of $200,000.
Col. Clinton L. Pagano (69) was appointed Executive Vice President of
Compliance and a Director of the Company in November 1992. Col. Pagano was the
Superintendent of the New Jersey State Police from 1975 to 1990, during the
tenures of two Governors. During 1990 and 1991, Col. Pagano was Director of the
New Jersey Division of Motor Vehicles, a position he was appointed to by a third
New Jersey Governor. Col. Pagano has over 40 years of law enforcement and
regulatory experience including the implementation in New Jersey of a
coordinated state and Federal organized crime control program. During his tenure
as Superintendent of the New Jersey State Police, Col. Pagano was the State
Director of Emergency Management, a Federal crisis management program and was
also responsible for developing and implementing various security programs for
the New Jersey Sports and Exposition Authority. Colonel Pagano is also presently
a director of Digital Products Corporation of Florida. Col. Pagano is considered
a foremost expert on gaming licensure and regulation. His reputation for law
enforcement and integrity is particularly important in the Native American
gaming segment. In addition to other contractual benefits, Col. Pagano's
employment agreement, as modified, provides for an annual base salary of
$100,000.
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Annexed hereto as Appendix "7" is a summary of the compensation paid by
the Debtor to its senior management.
The Debtor is not aware of any family relationship between any director
or executive officer and any other director or executive officer of the Debtor.
The Debtor's directors currently receive no compensation from the
Debtor but are reimbursed for their expenses in connection with their attendance
at each Board of Directors meeting.
6.2. Management Incentive Programs. In order to induce the Key Officers
(Edward M. Tracy and William S. Papazian) to remain with the Debtor during the
restructuring process and to reward them for maintaining and enhancing the value
of the Debtor's assets and business for the benefit of the Debtor's creditors
and shareholders, the Reorganized Debtor will distribute to the Key Officers on
the Effective Date, the Confirmation Payment, in such proportion to each Key
Officer as the Board of Directors of the Debtor shall determine, provided,
however, that the allocation of such Cash and notes shall be consistent with any
understandings existing between and among the Debtor and its Key Officerrs. The
Confirmation Payment is comprised in the aggregate of: (a) $250,000 in Cash and
(b) $550,000 in New Secured Notes. In addition, the Reorganized Debtor shall
distribute to the Key Officers 3.34% of the issued and outstanding shares of New
Common Stock on the Effective Date and 3.33% of the issued and outstanding
shares of common stock of the Reorganized Debtor on each of the first and second
year anniversaries of the Effective Date.
In addition, the Noteholders have agreed under the Plan to cap their
distributions of New Common Stock at 1,600,000 shares; provided that 50% of
those shares otherwise distributed to the Noteholders but for the effect of the
cap (up to a maximum of 75,000 shares) are distributed to the Key Offices; the
remaining 50% of such shares will be distributed to the holders of Class 4
Claims (other than with respect to the Noteholder Deficiency Claim).
Assuming the Noteholder Deficiency Claim is allowed for $79.7 million,
the Debtor projects that the aggregate Allowed Amount of Class 4 Claims would
have to be reduced to approximately $111.7 million before any such additional
shares would be distributed. Once such threshold is reached, each reduction of
Class 4 Claims by $1 million will result in the freeing up of approximately
3,500 additional shares for distribution in equal shares to Key Officers (50%)
and holders of allowed Class 4 Claims other than Noteholders (50%).
Finally, on the Effective Date, the Reorganized Debtor shall be deemed
to have adopted the Post-Confirmation Employee Incentive Plan, without further
corporate authority or action. The terms of the proposed Post-Confirmation
Employee Incentive Plan are outlined in Exhibit "C" to the Plan.
6.3. Employment Agreements. The following is a brief description of the
salient terms of existing employment agreements between the Debtor and the
Debtor's senior management:
The Debtor entered into an employment agreement with I.G. Davis, Jr.,
Chairman and former Chief Executive Officer on May 30, 1995 (the "1995 Davis
Agreement") which agreement provides for, among other things, a three-year term
commencing May 30, 1995 and automatic one-year extensions; annual salary at the
rate of $297,000 per year, additional incentive compensation equal to 60% of any
incentive compensation awarded to the Debtor's Chief Executive Officer, one
year's severance pay in the event of termination of the 1995 Davis Agreement by
the Debtor due to a failure by Mr. Davis to obtain or retain a necessary
regulatory permit, license or approval; upon a termination without cause by the
Debtor, the Debtor is obligated to pay Mr. Davis in specified increments the
present value of (x) all salary which would have been earned but for such
termination without cause for a period of three years commencing on such
termination date plus (y) three times Mr. Davis's incentive compensation for the
last full fiscal year preceding such termination. In the event of a change in
control (as defined in the 1995 Davis Agreement ) Mr. Davis has the right to
terminate the agreement and become entitled to the payments described above with
respect to a termination without cause, subject to specified limitations. The
1995 Davis Agreement includes a nine-month noncompetition covenant and customary
confidentiality covenant. In the event the Debtor does not obtain specified
Director and Officer liability insurance, the Debtor is obligated to pay Mr.
Davis $100,000 a year. On November 1, 1995, Mr. Davis voluntarily agreed to
defer and accrue payment of his salary until such time as he notifies the Debtor
otherwise. Mr. Davis reserved his right to receive such deferred salary provided
for by the terms of the 1995 Davis Agreement . All terms of Mr. Davis' prior
employment agreement remain unchanged.
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The Debtor entered into an employment agreement with Edward M. Tracy,
President, Chief Executive Officer and Chief Operating Officer on May 30, 1995
(the 1995 Tracy Agreement") which agreement provides for, among other things, a
three-year term commencing May 30, 1995 and automatic one-year extensions;
annual salary at the rate of $495,000 per year, incentive compensation as
determined by the Executive Compensation Committee of the Debtor's Board of
Directors, and one year's severance pay in the event of termination of the 1995
Tracy Agreement by the Debtor due to a failure by Mr. Tracy to obtain or retain
a necessary regulatory permit, license or approval. Upon a termination without
cause by the Debtor, the Debtor is obligated to pay Mr. Tracy, in specified
increments, the present value of (x) all salary which would have been earned but
for such termination without cause for a period of three years commencing on
such termination date plus (y) three times Mr. Tracy's incentive compensation
for the last full fiscal year preceding such termination. In the event of a
change in control (as defined in the 1995 Tracy Agreement ), Mr. Tracy has the
right to terminate the agreement and become entitled to the payments described
above with respect to a termination without cause, subject to specified
limitations. The 1995 Tracy Agreement includes a nine-month noncompetition
covenant and customary confidentiality covenant. In the event the Debtor does
not obtain specified Director and Officer liability insurance, the Debtor is
obligated to pay Mr. Tracy $100,000 a year.
Col. Clinton L. Pagano (retired) is a director of the Debtor and also
acts as the Debtor's Executive Vice President of Compliance. He is compensated
pursuant to a three-year employment agreement with the Debtor dated October 17,
1993 providing for an annual salary of $150,000. As of October 1, 1994, Col.
Pagano's Employment Agreement was amended by resolution of the Board of
Directors to provide for a current annual salary of $260,000. In the event of a
change of control of the Debtor, Col. Pagano's employment agreement provides
that the Debtor, and any successors, will continue to honor and be bound by the
agreement. During the duration of the employment agreement, the Debtor (or its
successor) is obligated to continue to pay a level of compensation not less than
the level applicable on the change of control date, fully perform the Debtor's
obligations on the change of control date, and continue benefit programs in
effect on the change of control date. Col. Pagano's employment agreement
provides that it may be terminated without cause upon 90 days' notice, in which
event the Debtor will be obligated to continue his salary and benefits for the
balance of the agreement, or 90 days, whichever is longer. In the event of the
death or disability of Col. Pagano, compensation will continue for a period of
six months following the occurrence of such an event. On November 1, 1995, Col.
Pagano voluntarily agreed to defer and accrue $160,000 per year of his $260,000
per year salary until such time as he notifies the Debtor otherwise. Col. Pagano
reserved his right to receive the deferred salary. All terms of Co.
Pagano's prior employment agreements remain unchanged.
The Debtor entered into an employment agreement with William S.
Papazian, Senior Vice President and General Counsel, Corporate Secretary on May
17, 1996 which agreement provides for, among other things, a three year term
commencing on June 1, 1996 with automatic one-year extensions; annual salary of
$160,000 which was increased to $200,000 retroactive to July 1, 1996, in
connection with the Debtor's ongoing reorganization; incentive compensation as
determined by the Executive Compensation Committee of the Debtor's Board of
Directors, and Debtors one year's severance pay in the event of termination of
the agreement by the Debtor due to a failure by Mr. Papazian to obtain or retain
a necessary regulatory permit, license or approval. Upon a termination without
cause by the Debtor, the Debtor is obligated to pay Mr. Papazian, in specified
increments, the present value of (x) all salary which would have been earned but
for such termination without cause for a period of three years commencing on
such termination date plus (y) three times Mr. Papazian's incentive compensation
for the last full fiscal year preceding such termination. In the event of a
change in control, Mr. Papazian has the right to terminate the agreement and
become entitled to the payments described above with respect to a termination
without cause, subject to specified limitations. The agreement includes a
customary confidentiality covenant.
ARTICLE VII.
ALTERNATIVES TO THE PLAN
The Debtor, after analyzing its alternatives and consulting with its
appropriate advisors as well as the Noteholders Steering Committee, believes
that the Plan provides creditors with the earliest and greatest possible value
that can be realized on their respective Claims. The principal alternatives to
confirmation of the Plan are: (i) confirmation of alternative plans submitted by
the Debtor or by another party in interest; or (ii) liquidation of the Debtor
under chapter 7 of the Bankruptcy Code.
If the Plan is not accepted, other parties in interest may have an
opportunity to file one or more alternative plans. The Debtor believes that this
alternative would result in costly and time-consuming litigation detrimental to
all Classes of
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creditors of the Debtor. The Debtor has considered alternatives to the Plan,
including, without limitation, alternatives which would involve the funding of
distributions to the existing creditors of the Debtor through the issuance of
debt and or equity securities, which securities would be serviced from the
prospective operating cash flows of the Reorganized Debtor. The Debtor, believes
that the Plan offers to its creditors aggregate distributions which exceed those
that could be obtained through the public or private sale of new debt or equity
securities.
The Debtor believes that the "stand-alone" alternative adopted in the
Plan is most beneficial to creditors and equity interest holders. A sale of the
Debtor to a third party or other alternatives resulting in a change in control
of the Debtor, could severely limit the Debtor's use of substantial tax loss
carryforwards that the Reorganized Debtor may have. Moreover, the implementation
of other alternatives could also increase substantially the operating and
financial risk of the Debtor as a result of a variety of factors, including the
possible termination of Native American Tribe management contracts. Finally, no
assurances would be possible that the Debtor would be able to obtain financing
from a third party sufficient to consummate an alternative plan. The Debtor
therefore has concluded that the "stand alone" Plan represents the most
feasible, certain and efficient method of providing for value to creditors and
equity interest holders.
7.1. Liquidation as an Alternative. The Debtor believes that a
liquidation of the Debtor would not be in the best interest of the Debtor or its
creditors and would provide certain holders of Claims with little or no return.
As the liquidation analysis included as Appendix 5 hereto indicates, a
liquidation of the Debtor would result in a substantial excess of liabilities
over assets. Liquidation under chapter 7 of the Bankruptcy Code would require
the appointment by the Bankruptcy Court of a trustee, having no historical
experience or knowledge of the Debtor's business, records or assets. The
additional administrative costs incurred also could be substantial and the
Debtor believes that conversion to a chapter 7 proceeding would have a
substantial adverse effect on the businesses of the Debtor's subsidiaries.
Appointment of a trustee for the Debtor would give certain of the Native
American Tribes the right to terminate their management agreements with CGMI and
CDGC, and would destroy any ability by CGMI and CDGC to negotiate new management
agreements in the future.
In addition, if the Debtor were liquidated, CGMI and CDGC would no
longer have properly licensed ownership and management, thus limiting CGMI and
CDGC's ability to operate their respective businesses in certain jurisdiction.
For the reasons stated above, the Debtor believes that any alternative
to confirmation of the Plan would result in substantial delays and lesser
recoveries.
7.2. Best Interests Of Unsecured Creditors And Shareholders.
Notwithstanding acceptance of the Plan by creditors, in order to confirm the
Plan the Bankruptcy Court must independently determine that the Plan is in the
best interests of all Classes of creditors and shareholders. This "best
interests" test requires that the Bankruptcy Court find that the Plan provides
to each member of each impaired Class of Claims and Interests a recovery which
has a present value at least equal to the present value of the distribution
which each such person would receive from the Debtor if the Debtor were instead
liquidated under chapter 7 of the Bankruptcy Code.
THE DEBTOR BELIEVES, AFTER ANALYZING ITS ALTERNATIVES AND CONSULTING
WITH ITS APPROPRIATE ADVISORS AS WELL AS THE NOTEHOLDERS STEERING COMMITTEE,
THAT THE PLAN IS IN THE BEST INTERESTS OF ALL CREDITORS AND SHAREHOLDERS.
To calculate the amount which members of each impaired Class of Claims
and Interests would receive if the Debtor were to be so liquidated, the
Bankruptcy Court must first determine the aggregate dollar amount that would be
generated from the liquidation of the Debtor (the "Liquidation Fund"). The
Liquidation Fund would consist of the proceeds from the disposition of the
assets of the Debtor plus the amount of any cash held by the Debtor. The
Liquidation Fund would then be reduced by the costs of the liquidation. Such
costs would likely include the fees of a trustee, as well as those of counsel
and other professionals that might be retained by such trustee; selling
expenses; any unpaid expenses incurred by the Debtor during its chapter 11 case
(such as fees for attorneys, financial advisors and accountants) which are
allowed in the chapter 7 proceeding; and claims arising by reason of the
trustee's rejection of obligations incurred by such Debtor during the pendency
of the chapter 11 case. These claims, and such other claims as might arise in
the liquidation or result from the current Debtor's chapter 11 case, would be
paid in full out of the Liquidation Fund before the balance of a Liquidation
Fund would be made available to pay Unsecured Claims. The present value of the
aggregate hypothetical distributions out of the Liquidation
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Fund (after subtracting the amounts described above) are then compared with the
present value of the property offered to each of the Classes of Claims and
Interests under the Plan to determine if the Plan is in the best interests of
each creditor and shareholder.
The Debtor has concluded that a liquidation of the Debtor would result
in reduced aggregate distributions to creditors compared to distributions
proposed under the Plan. The Debtor's liquidation analysis is annexed hereto as
Appendix "5" and the conclusions of this analysis with respect to impaired
Classes of Claims and Interests have been summarized therein. The Debtor's
analysis is dependent in part on certain assumptions as to the effect of
liquidation on the Debtor's wholly-owned subsidiaries.
Secured Claims, if any, will be treated in accordance with the
provisions of section 1124(1), (2) or (3) of the Bankruptcy Code. The Debtor now
believes that no such Claims will be asserted. Accordingly, no amounts
attributable to Class 3 Claims have been reflected in the foregoing analysis.
THE DEBTOR BELIEVES THAT THE PLAN PROVIDES THE GREATEST AND EARLIEST
POSSIBLE RECOVERIES TO CREDITORS. THE DEBTOR RECOMMENDS THAT YOU VOTE TO ACCEPT
THE PLAN.
Feasibility
The Plan will be considered feasible under the Bankruptcy Code if its
confirmation is not likely to be followed by the liquidation of the Reorganized
Debtor or the need for further financial reorganization of the Debtor, except as
provided in the Plan. The Debtor has analyzed its ability to concurrently meet
its obligations under the Plan and carry on its operations.
Assuming satisfaction of the conditions precedent to the effectiveness
of the Plan, the Debtor does not anticipate difficulty in performing its
obligations under the Plan. Pursuant to the Plan, all Claims against the Debtor
shall be discharged and released in full on the Effective Date, and all
creditors shall be precluded from asserting against the Debtor and its assets
any other or further Claim based upon any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Confirmation Date. On
the Effective Date of the Plan, all rights of holders of Claims or Interests of
all Classes under the Plan shall be limited solely to the right to receive the
distributions set forth in the Plan, and the holders of such Claims or Interests
shall have no further rights against the Debtor by virtue of such Claim.
Feasibility of the Plan is enhanced by the fact that a substantial portion of
the Debtor's indebtedness will be converted to equity on the Effective Date.
The Debtor has analyzed the sources and uses of funds in respect of its
performance of the terms of the Plan. Moreover, the Debtor has analyzed its
ability to meet from ongoing operations the debt service requirements of the New
Secured Notes under the New Indenture and other cash distributions required
under the Plan. A copy of this analysis, together with certain pro forma and
projected financial information in respect of the Reorganized Debtor, are
attached as Appendix "4" hereto.
ARTICLE VIII.
CONFIRMATION AND CONSUMMATION PROCEDURES
8.1. Creditors Entitled To Vote. Under the Bankruptcy Code, only
creditors or shareholders whose Claims or Interests belong to an impaired Class
are entitled to vote to accept or reject a plan of reorganization. Creditors or
shareholders whose Claims or Interests are unimpaired are deemed to have
accepted the Plan and are not entitled to vote. A creditor's Claim or
shareholder's Interest is impaired unless a plan (a) leaves unaltered the legal,
equitable and contractual rights to which such Claim or Interest entitled its
holder; or (b) reinstates the Claim or Interest pursuant to its terms.
Pursuant to Rule 3018(a) of the Bankruptcy Rules and subject to section
1126(g) of the Bankruptcy Code, the holder of an impaired Claim which was not a
Disputed Claim as of the date this Disclosure Statement was approved, is
entitled to vote on the Plan. Moreover, notwithstanding an objection to a Claim
or Interest, the Bankruptcy Court may temporarily allow the Claim or Interest in
an amount which the Bankruptcy Court deems proper for the purpose of voting on
the Plan. Section 1126(g) of the Bankruptcy Code provides that a class is deemed
not to have accepted a plan if such plan provides that
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the claims or interests of such class do not entitle the holders of such claims
or interests to receive or retain any property on account of such claims or
interests.
Pursuant to the foregoing, and other terms of the Plan, holders of
Allowed Claims in Classes 2, 3 and 4 and Interests in Class 5 are entitled to
vote on the Plan.
8.2. General Voting Instructions. Ballots and certain other materials
have been enclosed with each copy of this Disclosure Statement being sent to
each holder of an Impaired Class or Interest entitled to vote on the Plan.
Creditors and Interest holders should complete and sign each Ballot and return
it in the envelope enclosed for such purpose.
YOUR VOTE WILL NOT BE COUNTED UNLESS RECEIVED BY THE DEBTOR BY 5:00
P.M., EST, ON March 12, 1997. If you are the record or registered holder and the
beneficial owner of Old Secured Notes or Old Common Stock, you received your
Ballot directly from the Debtor. Your Ballot should be returned directly to the
Debtor by mail in the pre-addressed, postage-paid envelope provided herewith as
follows:
CAPITAL GAMING BALLOTING
c/o Bankruptcy Services, Inc.
70 East 55th Street
New York, New York 10022
Attn: Laura Campbell
If you are the beneficial owner, but not the record or registered
holder of Old Secured Notes or Old Common Stock, you may have received your
Ballot directly from the Debtor. If so, your Ballot should be returned directly
to the Debtor at the name and address set forth above. If you are the beneficial
owner, but not the record or registered holder of Old Secured Notes or Old
Common Stock, and you received your Ballot from such record or registered holder
(e.g., your bank, custodian or broker), your Ballot should be returned to such
record or registered holder. Such holder will tabulate the total amount and
number of votes in respect of securities held thereby and forward the results to
the Debtor. If you received a return envelope addressed to a broker, bank,
nominee or proxy intermediary, you must return your Ballot early enough for your
vote to be processed and then forwarded to the Debtor by March 12, 1997. Please
allow additional time.
Registered owners or holders of Old Common Stock and Old Secured Notes
which are not also the beneficial owners thereof, and which elect not to provide
to the Debtor a complete listing of all of the beneficial owners of such
securities as of the Stock Record Date or the Debt Record Date, as the case may
be, will be required to summarize and certify to the contents of Ballots
returned to them.
If you have any question concerning the voting procedures for
beneficial owners, contact your bank or broker or co-counsel for the Debtor at
the above address and phone number.
DO NOT RETURN OLD SECURED NOTES, EVIDENCE OF INDEBTEDNESS OR OLD COMMON
STOCK WITH YOUR BALLOT.
If a creditor has a Claim in more than one Class under the Plan, such
creditor will receive multiple Ballots. If you have received more than one
Ballot, you should assume that each Ballot is for a separate Class and you
should complete and return all Ballots so received. If a Ballot is damaged or
lost, or if you have any questions concerning any voting procedures, you may
contact:
CAPITAL GAMING BALLOTING
c/o Bankruptcy Services, Inc.
70 East 55th Street
New York, New York 10022
Attn: Laura Campbell
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8.3. Soliciting For Votes. The process of soliciting consents to
confirmation of the Plan must be fair and open without outside influence in the
form of representations, inducements or duress of any kind. To the extent that
you believe solicitation of your vote from any party is being sought outside of
the judicially-approved and statutorily-defined disclosure requirements and
voting procedures, please contact co-counsel for the Debtor.
8.4. Acceptance. Acceptance of a plan of reorganization requires that
each impaired Class of Claims or Interests (as classified therein) accepts that
Plan, with certain exceptions hereinafter discussed in Section 8.5 below. Thus,
acceptance of the Plan requires acceptance by each of the impaired Classes.
Classes of Claims and Interests that are not impaired under a plan are
deemed to have accepted the plan. Acceptances of the Plan are being solicited
only from those persons who hold Claims or Interests of impaired Classes.
The Bankruptcy Code defines acceptance of a plan by a Class of Claims
as acceptance by the holders of at least two-thirds (2/3) in dollar amount and a
majority in number of Claims of that Class, but for that purpose, only those
Claims, the holders of which actually vote to accept or reject the Plan, are
counted. The Bankruptcy Code defines acceptance of a plan by a Class of
Interests as acceptance by the holders of at lease two-thirds (2/3) of the
allowed interests in such class, but for that purpose, only those Interests, the
holders of which actually vote to accept or reject the Plan, are counted.
8.5. Non Acceptance And "Cramdown". Pursuant to section 1129(b) of the
Bankruptcy Code, the Bankruptcy Court may confirm a plan despite the
non-acceptance of the plan by an impaired class. This procedure is commonly
referred to as a "cramdown." Section 1129(b) provides that upon the request of
the proponent of a plan, the Bankruptcy Court shall confirm the plan despite the
lack of acceptance by an impaired class if: (a) the plan does not discriminate
unfairly with respect to each impaired class of claims or interests that has not
accepted the plan; (b) the plan is "fair and equitable" with respect to each
impaired non-accepting class; and (c) at least one impaired class has accepted
the plan. The Bankruptcy Code sets forth three different standards for
establishing whether a plan is "fair and equitable" with respect to a dissenting
class, depending on whether the class is comprised of secured or unsecured
claims or interests. In general, section 1129(b) of the Bankruptcy Code permits
confirmation notwithstanding non-acceptance by an impaired class if that class
and all more junior classes are treated in accordance with the "absolute
priority" rule, which requires that the dissenting class be paid in full before
a junior class may receive anything under the plan.
Pursuant to section 1129(b)(2)(B), if a class of unsecured claims
rejects a plan it may still be confirmed so long as the plan provides that (a)
each holder of a claim included in the rejecting class will receive or retain on
account of that claim property which has a value, as of the effective date of
the plan, equal to the allowed amount of such claim, or (b) a holder of any
claim or interest that is junior to the claims of such class will not receive or
retain on account of such junior claim or interest any property at all.
Pursuant to section 1129(b)(2)(C) of the Bankruptcy Code, if a Class of
Interests rejects a plan of reorganization, such plan may still be confirmed so
long as it provides that (a) each holder of an Interest included in the
rejecting Class will receive or retain on account of that Interest property
which has a value, as of the Effective Date of the plan, equal to the greatest
of the allowed amount of any fixed liquidation preference to which such holder
is entitled, any fixed redemption price to which such holder is entitled, or the
value of such Interest; or (b) the holder of any Interest that is junior to the
Interest of such Class will not receive or retain under the plan on account of
such junior Interest any property at all.
In the event one or more Classes of impaired Claims rejects the Plan,
the Bankruptcy Court will determine at the Confirmation Hearing whether such
Plan is fair and equitable and does not discriminate unfairly against any
rejecting impaired Class of Claims.
8.6. Confirmation Of The Plan. In order to confirm the Plan, section
1129 of the Bankruptcy Code requires that the Bankruptcy Court make a series of
determinations concerning the Plan, including, without limitation: (a) that the
Plan has classified creditor and shareholder interests in a permissible manner;
(b) that the contents of the Plan comply with the technical requirements of the
Bankruptcy Code (see discussion herein below); (c) that the Debtor has proposed
the Plan in good faith; and (d) that the Debtor has made disclosures concerning
the Plan which are adequate and include information
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concerning all payments made or promised in connection with the Plan and the
chapter 11 case. The Debtor believes that all of these conditions have been or
will be met.
The Bankruptcy Code also requires (unless the "cramdown" provisions of
the Bankruptcy Code are utilized), as a condition precedent to confirmation,
that the Plan be accepted by the requisite votes of each Class of creditors and
shareholders voting as separate Classes. Therefore, the Bankruptcy Court must
find, in order to confirm the Plan, that the Plan has been duly accepted. In
addition, the Bankruptcy Court must find that the Plan is feasible and that the
Plan is in the "best interests" of all creditors and shareholders. Thus, even if
creditors and shareholders of the Debtor were to accept the Plan by the
requisite number of votes, the Bankruptcy Court would be required to make
independent findings respecting the Plan's feasibility and whether the Plan is
in the best interests of the Debtor's creditors and shareholders, before it can
confirm the Plan.
On the Effective Date of the Plan, the rights afforded to creditors in
the Plan shall be in complete satisfaction, discharge and release of all
existing Claims of any nature whatsoever against the Debtor and any of its
assets or its estate, except as otherwise specifically provided in the Plan.
8.7. Confirmation Hearing. By Order of the Bankruptcy Court dated
February 6, 1997, the Confirmation Hearing has been scheduled for March 19, 1997
at 10:00 a.m., EST. Any objection to confirmation must be made in writing and
filed with the Bankruptcy Court with proof of service and received by the
following parties on or before five (5:00) o'clock p.m., EST, on March 10, 1997:
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
Co-Counsel for Debtor-in-Possession
Attention: Barry N. Seidel, Esq.
-and-
CRUMMY, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(201) 596-4500
Co-Counsel for Debtor-in-Possession
Attention: Frank J. Vecchione, Esq.
-and-
CAPITAL GAMING INTERNATIONAL, INC.
Bayport One
Suite 250
Black Horse Pike
W. Atlantic City, New Jersey 08232
(609) 383-3333
Attention: William S. Papazian, Esq.
-and-
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ANDREWS & KURTH L.L.P.
425 Lexington Avenue
New York, New York 10017
(212) 850-2800
Counsel for the Noteholders'
Steering Committee
Attention: Paul N. Silverstein, Esq.
-and-
FOX, ROTHSCHILD, O'BRIEN & FRANKEL
Princeton Pike Corporate Center
997 Lenox Drive
Building 3
Lawrenceville, New Jersey 08648-2311
Counsel for the Official
Committee of Unsecured
Creditors
Attn: Simon Kimmelman, Esq.
-and-
FIRST TRUST, N.A., AS INDENTURE TRUSTEE
c/o Oppenheimer Wolff & Donnelly
Plaza VII
45 South Seventh Street
Suite 4500
Minneapolis, Minnesota 55402-1609
Attn: Michael B. Fisco, Esq.
-and-
UNITED STATES TRUSTEE
United States Department of Justice
Office of the United States Trustee
One Newark Center, Suite 2100
Newark, New Jersey 07102
Attention: Robert Schneider, Esq.
Objections to confirmation of the Plan are governed by Bankruptcy Rule
9014. Unless an objection to confirmation is timely served and filed it may not
be considered by the Bankruptcy Court.
ARTICLE IX.
FEDERAL TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences of the Plan to the Debtor and holders of Claims and Interests. The
analysis contained herein is based upon the Internal Revenue Code of 1986, as
amended (the "Tax Code"), the Treasury Regulations promulgated and proposed
thereunder, judicial decisions and published administrative rulings and
pronouncements of the Internal Revenue Service ("IRS") as in effect on the date
hereof. Legislative, judicial or administrative changes or interpretations
enacted or promulgated hereafter could alter or modify the analysis and
conclusions set forth below. Any such changes or interpretations may be
retroactive and could affect significantly the federal income tax consequences
discussed below. This summary does not address foreign, state or local tax law,
or any estate or gift tax consequences of the Plan, nor does it purport to
address the federal income tax consequences of the Plan to special classes of
taxpayers (such as taxpayers who are not U.S. domestic corporations or citizens
or residents of the United States, S
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corporations, banks, mutual funds, insurance companies, financial institutions,
regulated investment companies, broker-dealers and tax-exempt organizations).
THE TAX CONSEQUENCES TO HOLDERS OF CLAIMS AND INTERESTS MAY VARY BASED
UPON THE INDIVIDUAL CIRCUMSTANCES OF EACH HOLDER. MOREOVER, THE TAX CONSEQUENCES
OF CERTAIN ASPECTS OF THE PLAN ARE UNCERTAIN DUE TO THE LACK OF APPLICABLE LEGAL
PRECEDENT AND THE POSSIBILITY OF CHANGES IN THE APPLICABLE TAX LAW. THERE CAN BE
NO ASSURANCE THAT THE IRS WILL NOT CHALLENGE ANY OF THE TAX CONSEQUENCES
DESCRIBED HEREIN, OR THAT SUCH A CHALLENGE, IF ASSERTED, WOULD NOT BE SUSTAINED.
ACCORDINGLY, EACH HOLDER OF A CLAIM OR INTEREST IS STRONGLY URGED TO CONSULT
WITH ITS OWN TAX ADVISOR REGARDING THE FOREIGN, FEDERAL, STATE OR LOCAL TAX
CONSEQUENCES OF THE PLAN.
9.1. Federal Income Tax Consequences to the Debtor
Utilization by the Debtor of Existing Tax Attributes
The Debtor may have net operating loss carryovers ("NOLs") as of the
Effective Date which will carry over and be available to the Debtor to offset
future income. While the issue is not entirely free from doubt, the Debtors do
not believe that any of these tax attributes are currently subject to limitation
under section 382 of the Tax Code. As discussed below, however, because the Plan
will result in an "ownership change" (as defined in section 382 of the Tax Code)
with respect to the Debtor, the availability of any such tax attributes to
offset income of the Debtor and its subsidiaries after the Effective Date may be
severely limited by section 382 of the Tax Code, unless the exception provided
in section 382(1)(5) of the Tax Code (the "Bankruptcy Exception") applies. (In
general, an ownership change occurs if the stock ownership of a company changes
by more than 50 percentage points during a three-year testing period.) These tax
attributes will also be reduced by any gain or income recognized as a result of
the transactions contemplated by the Plan, in particular, any discharge of
indebtedness income ("COI income") excluded from income pursuant to section 108
of the Tax Code. The precise amount of COI income realized but not recognized
upon plan consummation has not been finally determined, and will depend in part
upon the fair market value of the New Common Stock.
(a) Effect of Section 382 of the Tax Code. The Plan will cause an
"ownership change" within the meaning of section 382 of the Tax Code on the
Effective Date.
In general, unless the Bankruptcy Exception applies, a corporation that
experiences an ownership change may utilize its pre-change NOLs (and certain
built-in losses) only up to an annual amount equal to the "Section 382
limitation," which is calculated as the product of (i) the federal long-term
tax-exempt rate at the time of such ownership change (5.68% for changes
occurring in December 1996) and (ii) the fair market value of the equity of the
corporation immediately before the ownership change. In a bankruptcy proceeding,
however, the fair market value of the equity of the corporation will also
include the increase in value resulting from any surrender or cancellation of
claims. Further, if section 382 of the Tax Code applies with respect to an
ownership change, and the continuity of business enterprise requirement of
section 382 of the Tax Code is not satisfied during the two-year period
following the date of such ownership change, then the section 382 limitation is
limited to recognized built-in gains; the Debtor expects, however, to satisfy
this requirement.
If the corporation's taxable income which would otherwise be offset by
NOLs in a given year exceeds the section 382 limitation, the excess is generally
subject to federal income tax (except to the extent attributable to certain
"built-in gains" of the corporation). NOLs not utilized in a given year by
virtue of this limitation remain available for use in future years until their
normal expiration dates. To the extent that a corporation's section 382
limitation in a given year exceeds its taxable income for such year, the excess
amount will increase the section 382 limitation for the following taxable year.
(b) The Bankruptcy Exception. Pursuant to the Bankruptcy Exception
under section 382(1)(5) of the Tax Code, the general section 382 limitation will
not apply if the stockholders and certain "qualified creditors" of such
corporation immediately before the ownership change own at least 50 percent of
the stock of the corporation, by vote and value, immediately after such change,
by virtue of their status as stockholders or "qualified creditors" immediately
before such
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change. For this purpose, stock transferred to a creditor is taken into account
only to the extent that such stock is transferred in satisfaction of debt and
only if such debt either (i) was held by the creditor at least 18 months before
the filing of the Chapter 11 case, or (ii) arose in the ordinary course of the
trade or business of the old loss corporation and is held by the person who at
all times held the beneficial interest in such debt. These requirements will not
apply, however, and thus a loss corporation generally may treat the debt as
meeting the holding period requirement, unless (i) the creditor becomes a five
percent (5%) shareholder of the loss corporation (directly or indirectly)
immediately after the ownership change; or (ii) such creditor's participation in
the formulation of the reorganization plan makes it evident to the Debtor that
the creditor has not owned the debt in question for the required period.
Even if the Bankruptcy Exception applies, however, the Debtor must
reduce its NOLs and certain other tax attributes by the amount of interest
claimed as a deduction on any indebtedness converted into stock during the
three-year period preceding the taxable year of the ownership change, in
addition to the portion of the current year that precedes the Effective Date. In
addition, a second ownership change during the two-year period following
consummation of the Plan will effectively eliminate the NOLs and other tax
attributes of the Debtor carried forward from pre-Effective Date taxable years
with respect to any taxable year ending after the date of the second ownership
change.
The Bankruptcy Exception automatically applies to a plan of
reorganization that satisfies its requirements. A debtor has the option,
however, to "elect out" of Bankruptcy Exception. In such a case, the normal
section 382 limitation will apply, and the NOLs will be subject to the annual
limitation as described above. Assuming that the plan qualifies under the
Bankruptcy Exception, the Debtor does not presently intend to make this
election. Accordingly, to reduce the risk that a second ownership change will
occur within 2 years of plan consummation, the Plan will incorporate certain
restrictions on the transferability of the New Common Stock (which restrictions
shall lapse in the event that the Debtors either do not qualify for the
Bankruptcy Exception or choose to elect not have the Bankruptcy Exception
apply). There can be no assurance, however, that these restrictions will in fact
prevent an ownership change that could adversely affect the Debtor.
At this time, the Debtor has been unable to determine whether
pre-existing shareholders and "qualified creditors" will receive 50 percent or
more of the New Common Stock. The Debtor is aware, however, that a significant
portion of the Old Senior Notes were acquired less than 18 months prior to the
bankruptcy filing. Because holders of the Old Senior Notes will receive up to 80
percent of the New Common Stock pursuant to the Plan, the failure of such holder
to meet the definition of a "qualified creditor" will increase the likelihood
that the Bankruptcy Exception will not apply. In addition, in the absence of a
court order or other mechanism to restrict certain transfers of the Old Senior
Notes after the bankruptcy filing, there can be no assurance that holders of Old
Senior Notes who in fact acquired their claims more than 18 months prior to the
bankruptcy filing will continue to hold the Old Senior Notes at the Effective
Time. If the Plan does not satisfy the requirements of the Bankruptcy Exception,
the value of any NOLs otherwise available to the Debtor at the Effective Time
will be materially diminished.
(c) Discharge of Indebtedness Income. Under the Tax Code, a taxpayer is
generally required to include COI income in gross income. COI income is not
includible in gross income, however, if it arises in a case under the Bankruptcy
Code. Instead, any COI income otherwise includible in gross income is generally
applied to reduce certain tax attributes in the following order: NOLs, general
business credit carryovers, minimum tax credit carryovers, capital loss
carryovers, the taxpayer's basis in property, and foreign tax credit carryovers
The discharge under the Plan of certain of the Claims, in particular
the Old Senior Notes and, possibly, the promissory notes held by Republic
Services Corporation, will result in COI income, which will reduce the tax
attributes of the Debtor by the difference between the fair market value of the
consideration received by the holders thereof and the amount of the discharged
indebtedness.
Alternative Minimum Tax
The Tax Code provides that, for any taxable year, a corporation's
federal income tax liability equals the greater of (i) the regular tax computed
at the regular 35% corporate tax rate on taxable income and (ii) the alternative
minimum tax ("AMT") computed at a lower tax rate (20%) but on a broader income
base (alternative minimum taxable income ("AMTI")). For purposes of computing a
corporation's regular federal income tax liability, all of the income recognized
in a taxable year
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may be offset by available NOLs and other tax carryovers (to the extent
permitted under, inter alia, sections 382 and 383 of the Tax Code). In contrast,
for purposes of computing AMTI, NOLs (as determined for AMT purposes) and other
tax carryovers generally are taken into account, but may not offset more than
90% of the pre-NOL AMTI. Thus, a corporation that is currently profitable for
AMT purposes generally will be required to pay federal income tax at an
effective rate of at least 2% of its pre-NOL AMTI (10% of the 20% AMT tax rate),
regardless of the amount of its NOLs. As a result, even if the Debtor is
otherwise able to fully shelter its income with NOLs, it will be subject to
current taxation in any year in which it has positive net pre-NOL AMTI
(including as a result of gain and income recognition in connection with the
transactions contemplated by the Plan). To the extent that a corporation's AMT
liability for any taxable year exceeds its regular federal income tax liability,
the excess may be carried forward as a credit against regular tax liability in
subsequent years.
9.2. Federal Income Tax Consequences to Creditors
Generally
The federal income tax consequences of the Plan to a Creditor will
depend upon several factors, including but not limited to: (i) whether the
Creditor's Claim (or portion thereof) constitutes a Claim for principal or
interest; (ii) the type of consideration received by the Creditor in exchange
for the Claim; (iii) whether the Creditor is a resident of the United States for
tax purposes (or falls into any of the special classes of taxpayers excluded
from this discussion as noted above); (iv) whether the Creditor has taken a bad
debt deduction or worthless security deduction with respect to his Claim, and
(v) whether the Creditor receives distributions under the Plan in more than one
taxable year. CREDITORS ARE STRONGLY ADVISED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX TREATMENT UNDER THE PLAN OF THEIR PARTICULAR CLAIMS.
Creditors Who Receive Solely Cash
Creditors receiving solely cash in exchange for their Claims will
generally recognize taxable gain or loss in an amount equal to the difference
between the amount realized and each such Creditor's adjusted tax basis in the
Claim. The amount realized will equal the amount of cash to the extent that such
consideration is not allocable to any portion of the Claim representing accrued
and unpaid interest. See "Federal Income Tax Consequences to Creditors - Receipt
of Interest" below.
The character of any recognized gain or loss (i.e., ordinary income, or
short-term or long-term capital gain or loss) will depend upon the status of the
Creditor, the nature of the Claim in the Creditor's hands, the purpose and
circumstances of its acquisition, the Creditor's holding period of the Claim,
and the extent to which the Creditor previously claimed a deduction for the
worthlessness of all or a portion of the Claim.
A loss generally is treated as sustained in the taxable year for which
there has been a closed and completed transaction, and no portion of a loss with
respect to which there is a reasonable prospect of reimbursement may be deducted
until it can be ascertained with reasonable certainty whether or not such
reimbursement will be recovered.
Creditors should consult with their own tax advisors as to the matters
discussed in this section concerning character and timing of recognition of gain
or loss. Because a loss will be allowed as a deduction only for the taxable year
in which the loss was sustained, a Creditor that claims a loss in the wrong
taxable year risks denial of such loss altogether. In the case of certain
categories of Claims, consideration should be given to the possible availability
of a bad debt deduction under section 166 of the Tax Code for a period prior to
the Effective Date. In addition, a portion of any distributions received after
the Effective Date may be taxed as ordinary income under the imputed interest
rules.
Creditors Who Receive Cash and Stock
(a) Generally. The federal income tax consequences of the Plan to
the holders of Allowed General Unsecured Claims, who will receive shares of the
Debtor Common Stock in addition to Cash, will depend in large part on whether
the exchange of their Claims for such consideration will be treated, in whole or
in part, as a "recapitalization" of the Debtor within the meaning of section
368(a)(1)(E) of the Tax Code.
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If the exchanges contemplated by the Plan are made pursuant to
such a recapitalization, then an exchanging Creditor generally will not
recognize any gain or loss for federal income tax purposes (except to the extent
of "boot" and any consideration attributable to accrued but unpaid interest).
See "Federal Income Tax Consequences to Creditors - Receipt of Interest" below.
If an exchange is not made pursuant to a recapitalization, then an exchanging
Creditor will recognize gain or loss on such exchange. This discussion assumes
that each such Creditor holds its Claim, and will hold any New Common Stock
received under the Plan, as "capital assets" within the meaning of section 1221
of the Tax Code.
In order for an exchange contemplated by the Plan to constitute a
tax-free recapitalization, the Claim exchanged by a Creditor must qualify as a
"security" for federal income tax purposes, and the Creditor must receive stock
(and/or securities) in the exchange. The term "security" is not defined in the
Tax Code or the regulations issued thereunder, and has not been clearly defined
by court decisions. In general, a debt instrument constitutes a "security" if it
represents a participating, continuing interest in the issuer, rather than
merely the right to a cash payment. Thus, the term of the debt instrument is
usually regarded as a significant factor in determining whether it is a
security. The IRS has ruled that a debt instrument with a maturity of ten years
or more is treated as a security. However, under the case law, debt instruments
with maturities ranging between five and ten years are often held to be
securities. Instruments with a five-year term or less rarely qualify as tax
securities. Further, claims arising out of the extension of trade credit or
litigation generally will not constitute tax securities. Thus, except in certain
limited circumstances, it appears that the Claims to be exchanged for the New
Common Stock will not constitute securities for tax purposes. Nevertheless,
because individual circumstances may differ significantly, the Creditors should
consult their own tax advisors.
(b) Tax Consequences of an Exchange. If an exchange of a Claim for
cash and New Common Stock is treated as a recapitalization within the meaning of
section 368(a)(1)(E) of the Tax Code, the federal income tax consequences to
such Creditors (other than such Creditors who receive only cash in lieu of
fractional shares or de minimis interests), would be as follows:
(i) Subject to the discussion below as to accrued but unpaid
interest, a Creditor would not recognize loss on the exchange, but
would recognize gain to the extent of the lesser of (a) the amount
of gain realized from the exchange and (b) the amount of the cash
received in the exchange (hereinafter referred to as "boot"). The
amount of gain realized, if any, would be equal to the excess of
(a) the sum of the cash and the fair market value of the New
Common Stock received, over (b) such Creditor's adjusted tax basis
in the Claims surrendered in the exchange.
(ii) Any such gain recognized on the exchange would be
capital gain, and such capital gain would be long-term capital
gain if such Creditor held the Claim for more than one year as of
the Effective Date.
(iii) Except for the consideration treated as received in
exchange for accrued but unpaid interest: (A) a Creditor should
have an aggregate tax basis in the New Common Stock equal to such
Creditor's adjusted tax basis in the Claims exchanged therefor,
reduced by the amount of any boot received and increased by any
gain recognized on the exchange, and (B) the holding period of the
New Common Stock should include the holding period of the Claims
exchanged therefor.
(iv) A Creditor receiving cash in lieu of fractional shares
or de minimis interests will be treated as having received such
New Common Stock and having exchanged it for cash in a transaction
which would be a transaction subject to section 302 of the Tax
Code and related provisions. Any such exchange should generally
result in capital gain or loss measured by the difference between
the cash received for the fractional or de minimis interest and
the Creditor's adjusted tax basis for such interest.
Alternatively, if the exchange by a Creditor of a Claim for cash and
New Common Stock is be treated as a taxable exchange under section 1001 of the
Tax Code, then the federal income tax consequences to the Creditors of such
Claims would be as follows:
(i) Subject to the discussion below as to accrued but unpaid
interest, a Creditor would recognize gain or loss on the exchange
in an amount equal to the difference between (A) the sum of the
cash and fair
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<PAGE>
market value of the New Common Stock as of the Effective Date
and (B) such Creditor's adjusted tax basis in its Claim.
(ii) Any such gain or loss should be capital gain or loss,
and such capital gain or loss should be long-term capital gain or
loss if such Creditor held its Claim for more than one year as of
the Effective Date.
(iii) A Creditor's tax basis in the New Common Stock would be
equal to the fair market value of the New Common Stock as of the
Effective Date. The holding period of the New Common Stock would
begin on the day immediately following the Effective Date.
Receipt of Interest
A portion of the consideration received by a Creditor in satisfaction
of a Claim may be allocated to the portion of such Claim (if any) that
represents accrued but unpaid interest. If any portion of the distribution were
required to be allocated to accrued interest, such portion would be taxable to
the Creditor as interest income, except to the extent the Creditor has
previously reported such interest as income.
In the event that a Creditor has previously reported the interest
income, only the balance of the distribution after the allocation of proceeds to
accrued interest would be considered received by the Creditor in respect of the
principal amount of the Claim. Such an allocation would reduce the amount of the
gain, or increase the amount of loss, realized by the Creditor with respect to
the Claim. If such loss were a capital loss, it would not offset any amount of
the distribution that was treated as ordinary interest income (except, the case
of individuals, to the limited extent that capital losses may be deducted
against ordinary income).
9.3. Federal Income Tax Consequences to Holders of Common Stock
Holders of Old Common Stock will receive 50,000 shares of the New
Common Stock in exchange for their shares. Accordingly, holders of Old Common
Stock will not recognize gain or loss on the exchange. A holders' tax basis in
the New Common Shares will equal their tax basis in the Old Common Stock
exchanged therefor, and the holding period of the New Common Stock will include
the holding period of the Old Common Stock.
9.4. Federal Income Tax Consequences of Owning New Secured Notes
Original Issues Discount
In general, a holder of a debt instrument issued with original issue
discount ("OID") must include that OID in income on a constant yield to maturity
basis over the term of the debt instrument. The New Notes will be treated as
issued with OID to the extent that their "stated redemption price at maturity"
exceeds their "issue price." The stated redemption price at maturity of an
instrument includes all payments required to be made over the term of the
instrument other than payments of "qualified stated interest," which is
generally defined as interest payments that occur at fixed periodic intervals of
one year or less. The issue price of the New Secured Notes will equal either the
fair market value of the New Secured Notes, if either the New Secured Notes or
the Old Senior Notes surrendered in exchange therefor are or are expected to
trade on an "established securities market" within the meaning of section
1273(b)(3) of the Tax Code, or their stated principal amounts, provided that the
stated interest rate on the New Notes exceeds the "applicable federal rate."
Because amounts designated as interest on the New Secured Notes will not
constitute "qualified stated interest," the New Secured Notes will be treated as
issued with OID. A holder will not be required to include such OID in income to
the extent that his tax basis in the New Secured Notes exceeds the sum of all
amounts payable under the New Secured Notes other than qualified stated
interest. In addition, a holder may partially offset OID (if any) by an amount
equal to the excess of its tax basis (if less than or equal to the sum of all
the amounts payable on the New Secured Notes other than qualified stated
interest) over the adjusted issue price of the New Secured Notes.
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<PAGE>
Market Discount
The Tax Code generally requires holders of a "market discount bond," as
defined below, to treat as ordinary income any gain realized on the disposition
(including by gift) of the bond the extent of the market discount accrued during
his period of ownership. The market discount rules generally require a taxpayer
to acquire market discount in an amount equal to a ratable portion of the bond's
market discount based upon the number of days the taxpayer has owned the bond at
the time of disposition, as a percentage of the number of days from the date the
taxpayer acquired the bond to its date of maturity. A "market discount bond" is
a debt obligation purchased at a market discount, subject to a statutory de
minimis exception. For this purpose, market discount generally equals the excess
of either (x) the stated redemption price at maturity of the debt instrument or
(y) in the case of a debt instrument issued with OID, the revised issue price of
the debt instrument, over the adjusted tax basis of the debt instrument
immediately after its acquisition.
Gain required to be recognized under the plan by a holder who acquired
his claim at a market discount but did not elect to include the market discount
in income currently will be treated as ordinary income to the extent of the
accrued market discount on the claim. If, because the exchange qualifies as a
"recapitalization" as described above, the holder does not recognize gain equal
to the full amount of the accrued market discount on the claim, the holder may
be required to treat as ordinary income the remaining accrued market discount
upon the subsequent disposition of the New Common Stock or New Secured Notes
issued under the Plan. For this purpose, a "disposition" includes a partial
principal payment on the New Secured Notes. With respect to holders of claims
who receive both New Common Stock and New Secured Notes under the plan, it is
not clear how the accrued market discount on a claim should be allocated between
these instruments. It is possible that the accrued market discount is allocated
entirely to the New Secured Notes, pro rata between the New Common Stock and New
Secured Notes based upon relative fair market values or in some other manner. In
addition, it is not clear how much market discount, if any, that the holder
should accrue prospectively on the New Secured Notes. It would appear, however,
that any market discount to be accrued prospectively from the date of the
exchange will be reduced by the amount of any OID with respect to the New
Secured Notes.
The market discount rules also provide that a holder of a New Secured
Note that qualifies as a "market discount bond," to the extent such holder does
not elect to include market discount in income currently, may be required to
defer the deduction of interest expense on indebtedness the holder incurred or
maintained to carry the New Secured Note until the holder disposes of the New
Secured Note in a taxable transaction.
Instead of recognizing market discount (if any) upon the disposition of
New Secured Notes, a holder should be able to elect to include market discount
in income on a current basis. The current inclusion election, once made, applies
to all market discount obligations acquired on or after the first day of the
first taxable year in which the election applies, and may not be revoked without
the consent of the Service.
Disposition of New Secured Notes
In general, a holder of New Secured Notes will recognize gain or loss
upon the sale, exchange, redemption or other taxable disposition of the New
Secured Notes measured by the difference between (i) the amount realized (except
to the extent attributable to accrued interest) and (ii) the holder's tax basis
in the New Secured Notes (as increased by any original issue discount and market
discount previously included in income by the holder and decreased by any cash
payments other than payments of qualified stated interest). Subject to the
market discount rules discussed above, any such gain or loss will generally
qualify as long-term capital gain or loss, provided that the New Secured Notes
have a holding period of more than one year. The portion of the amount realized
that is attributable to accrued interest will constitute interest income to a
cash basis holder. An accrual basis taxpayer should be entitled to exclude
amounts attributable to accrued interest to the extent that it previously
included such amount in income.
9.5. Importance of Obtaining Professional Tax Assistance
The foregoing is intended to be a summary only and not a substitute for
consultation with a tax professional. The federal, state, local and foreign tax
consequences of the Plan are complex and, in some respects, uncertain. Such
consequences may also vary based upon the individual circumstances of each
holder of a Claim or Interest. Accordingly, each holder of a Claim or Interest
is strongly urged to consult with its own tax advisor regarding the federal,
state, local and foreign tax consequences of the Plan.
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<PAGE>
THE FOREGOING IS INTENDED TO BE ONLY A SUMMARY OF CERTAIN OF THE U.S.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN, AND IS NOT A SUBSTITUTE FOR CAREFUL
TAX PLANNING WITH A TAX PROFESSIONAL. ACCORDINGLY, EACH HOLDER OF A CLAIM OR
INTEREST IS STRONGLY URGED TO CONSULT WITH ITS OWN TAX ADVISOR REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PLAN.
ARTICLE X.
RECOMMENDATION AND CONCLUSION
The Debtor believes that the Plan provides the greatest and earliest
possible recoveries to the Debtor's creditors and Equity Interest holders. The
Debtor believes that acceptance of the Plan is in the best interests of all
creditors and Equity Interest holders of the Debtor and therefore recommends
that you vote to accept the Plan.
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<PAGE>
Additional copies of this Disclosure Statement may be obtained by contacting
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
(212) 821-8000
Co-Counsel for Debtor-in-Possession
Attention: Joseph Smolinsky, Esq.
-or-
CRUMMY, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
(201) 596-4500
Co-Counsel for Debtor-in-Possession
Attention:
Sam Della Ferra, Esq.
Dated: February 6, 1997
CAPITAL GAMING INTERNATIONAL, INC.
Debtor and Debtor In Possession
By: /s/ William S. Papazian
----------------------------------
William S. Papazian
Vice-President and General Counsel
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4669
(212) 821-8000
Co-Counsel for Debtor-in-Possession
CRUMMY, DEL DEO, DOLAN,
GRIFFINGER & VECCHIONE
A Professional Corporation
One Riverfront Plaza
Newark, New Jersey 07102-5497
201) 596-4500
Co-Counsel for Debtor-in-Possession
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<PAGE>
Appendix "1" To Disclosure Statement
------------------------------------
PLAN OF REORGANIZATION
----------------------
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<PAGE>
CAPITAL GAMING INTERNATIONAL, INC.
Appendix "2" To Disclosure Statement
Unaudited Consolidated Financial Statements
of Debtor as of September 30, 1996
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<PAGE>
CAPITAL GAMING INTERNATIONAL, INC.
Appendix "3" To Disclosure Statement
Audited Consolidated Financial Statements
of Debtor as of June 30, 1996
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<PAGE>
CAPITAL GAMING INTERNATIONAL, INC.
Appendix "4" To Disclosure Statement
Certain Pro Forma and Projected Financial Information
-45-
<PAGE>
CAPITAL GAMING INTERNATIONAL, INC.
Appendix "5" To Disclosure Statement
Liquidation Analysis and Contrasting Distributions
Under Plan vs. Chapter 7 Liquidation
Capital Gaming International, Inc.
Liquidation Analysis
As of 6/30/96
Value in Chapter 7
Liquidation
Cash in banks $ 4,000
Restricted Cash
First Trust (Bond Trustee) 413,000 (1)
First Trust (Bond Trustee) 524,000 (1)
First American Title
(CC/RC Trustee) 500,000 (1)
Accounts Receivable
Management services agreement accrual
(CGMI) 0 (2) (4)
Prepaid Expenses 0
Equipment & Furniture 0
Note Receivable
CDGC 0 (3)
CGMI 0 (2) (4)
Fair Market Value of Subsidies
CDGC 0
CGMI (Residual value of cash flows after
deducting receivables and notes
above) 0
Chapter 7 trustee fees (43,230) (5)
Present Value of Going Concern Costs 0
------------------
Total Asset Value 1,397,770
==================
(1) Subject to Noteholders' secured claim
(2) Upon liquidation, CGMI may have various claims against CGI that
would serve as an offset against current balances due.
(3) Investment likely would be worthless in liquidation scenario.
(4) Upon liquidation, CGMI would have no available cash.
(5) Trustee fees are estimated at 3% of gross assets.
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<PAGE>
<TABLE>
<CAPTION>
APPENDIX "5"
CONTRASTING DISTRIBUTIONS
PLAN VERSUS CHAPTER 7 LIQUIDATION
<S> <C> <C> <C> <C>
Class Description Projected Allowed Claims Under Plan Under Liquidation
Estimated Estimated Estimated Estimated
Recovery ($) Recovery (%) Recovery ($) Recovery(%)
Chapter 11 Administrative $500,000 $500,000 100% $0 0%
Expenses
Professional Fees $500,000 $500,000 100% $0 0%
Noteholders Adequate $200,000 $ 0 0% $1,397,000 70%
Protection
Chapter 7 Administrative $ 43,000 Not Applicable Not Applicable $43,000 0%
Expenses
Nontax priority $ 8,000 $ 8,000 100% $ 0 0%
Claims
Class 1 $ 0 0%
Class 2 Noteholder secured $ 23,500,000 $22,500,000 96% $ 0 0%
claim
Class 3 Secured claims $ 0 $ 0 100% $ 0 100%
Class 4 General unsecured $108,500,000 $ 1,249,500 1-2% 0 0%
claims
Class 5 Old Common Stock $ 9,329,574 $ 119,000 .6% $ 0 0%
Class 6 Old Options Not Applicable $ 0 0% $ 0 0%
</TABLE>
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<PAGE>
APPENDIX "6"
PAYMENTS MADE BY CAPITAL GAMING INTERNATIONAL, INC. TO
CREDITORS DURING STATUTORY PREFERENCE PERIOD5
NAME OF CREDITOR AMOUNT PAID
A Business Conference Call, Inc. $ 5,934.80
ADP 7,954.05
ADP Proxy Services 865.95
American Express 6,141.94
American Gaming Summit 1,130.00
American Stock Transfer & Trust 1,500.00
Bell Atlantic-NJ 5,694.53
Bell Atlantic-PA 609.79
Bernstein, Cohen, Simpson ,973.81
Blue Cross & Blue Shield 18,058.32
Brad Buchanan 55,001.67
Burglass & Associates 8,777.50
Capital Development Gaming Corp. 48,000.00
Conrad, O'Brien, Gellman & Rohn 8,118.24
Coopers & Lybrand, L.L.P. 12,000.00
Daphne Leamont 5,250.00
Dennis J. Roberts II, Esq. 8,410.35
Farrell, Fritz, Caemmerer, Clearly, Barnos 14,961.72
Federal Express 4,827.19
First Corporate Sedans 1,388.60
Gallagher, Briody & Butler 163,250.00
George Kennedy 2,939.00
Ikon Capital 909.29
Internal Revenue Service 1,055.75
Kaps, Inc. 985.98
Keith D. Jones 2,150.00
Levin, Rosen, Pollack & Dougherty 2,333.70
Lewan & Associates 726.94
Lloyd G. Wilcox 6,554.90
Matthews, Woodbridge & Collins, P.A. 6,123.50
Merrill Lynch 9,340.41
Michael R. Barozzi 22,500.00
Mobilcomm 1,293.99
Montgomery, Barnett, Brown, Read, et al. 13,000.00
Mossman's Business Machines 3,219.98
Pacquisition Corp. t/a Packard Press 14,416.63
PCS Computers 2,334.48
PECO Energy 976.56
Peter Liguori 12,394.99
Philadelphia Gas Works 843.00
Runyon & Associates 4,200.00
Sprint 4,107.59
Staples 1,131.31
Technical Services 4,399.80
Thomas A. Hanley, Esq. 15,000.00
Transamerica Assurance Co. 3,367.20
-1-
<PAGE>
United States Realty & Investment Co. 21,166.75
West Publishing Corp. 5,724.62
Westlaw 812.00
-2-
